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Ololade Omosan-Agie
The International Monetary Fund said multinational mining companies’ aggressive tax avoidance is costing their host African countries millions of dollars annually.
The IMF said in a publication that African governments and domestic investors often lack the capacity to exploit mineral resources leading to the option of multinational enterprises.
Africa is host to the world’s largest mineral deposit as it is estimated that 30 per cent of the world’s mineral resources are found in the continent.
These resources are mostly exploited by multinationals as the content seeks to attract foreign direct investments.
The IMF said, “There is growing concern that aggressive tax planning by multinationals results in the erosion of the tax base and lower tax revenue.
“New research into the extent of profit shifting in Sub-Saharan Africa (SSA) mining indicates African countries are losing between $470m and $730m per year in corporate income tax on average from MNE tax avoidance.
“Many SSA countries have already taken steps to address vulnerabilities to profit-shifting in the mining sector.”
According to the multilateral lender, the structure of mining fiscal regimes in SSA directly affects the pattern and magnitude of revenue from mining.
“International profit shifting involves MNE actions to take advantage of tax differentials between countries.
“At its simplest, this means MNEs seek to allocate corporate tax deductions to countries with higher tax rates, with the corresponding income allocated to lower-tax countries.”
