A high-level meeting was convened by the UN on the role of Extractive Industries in financing sustainable development in Africa. Participants included top-level government officials Mr. Abdulla Hamdok, the prime minister of Sudan, Mr. Kwaku Asomah-Cheremeh, minister of Ghana, UN Deputy Secretary-General Amina Mohammed (African Region),  Vera Songwe, Executive Secretary of the UN Economic Commission for Africa and Logan Wort of the African Tax Administration Forum (ATAF). More than 150 delegates attended the virtual meeting. A key focus of the meeting was the recent report from UNCTAD titled Tackling Illicit Financial Flows for Sustainable Development in Africa.

The report contends that while the African subcontinent is rich in mineral resources and fossil fuel,. Illicit Financial Flows (‘IFFs’) out of Africa have reduced the resources available for development. The definition of IFF includes illegal mineral exploitation, trade mis-invoicing, illegal markets, bribery, money laundering, tax fraud and structures used by MNEs to shift profits to low tax nations. Other problems include climate change, lack of good governance, lack of transparency, lack of political stability and other socio-economic development issues.  These issues have been aggravated by Covid-19; the combined impact of informal markets and COVID-19 has resulted in a drastic reduction in the ability of African countries from capturing the real value of resources and reducing the fiscal revenue in Africa. Speakers from ATAF and Tax Justice Network emphasized the impact of IFFs arising from profit shifting, tax evasion and tax avoidance and emphasized plans and initiatives to address these issues.

Logan Wort of ATAF gave specific examples of potential revenue loss of around 400 million dollars that were prevented by ATAF actions. He suggested actions like investment in risk tools to tax MNEs, framing a strong legal framework of tax administration, transfer pricing rules and guidelines to deter tax avoidance.  Further with the growth of Foreign Direct Investment moving to digital and intangibles, diversification of economy has taken place and there is a need to reconsider incentives and bring into tax net digital economy businesses. He did not consider the OECD Pillar 2 proposal for a minimum tax rate of 12.5% to be appropriate and advocated a higher rate.

Alvin Mosioma of TJN felt that the UNCTAD study showed extractives to be the highest contributor to IFFs. He felt that multinational companies use both legal and illegal ways to remove funds to tax havens and other secrecy jurisdictions, and measures to address cross border profit shifting, renegotiating the double tax avoidance agreements, limiting tax incentives, policies on transfer pricing,  deterring abuse of management fees and preventing thin capitalization was necessary. It was also suggested that a public registry of beneficial ownership be created and harmonization of tax policies at regional, national and especially at the global level.  Overall, countries stressed the importance of strong regulatory code for the governance of the mining sector, a minimum tax base, and strong disclosure requirements for ownership, taxes and royalties.