The practice of having ones money stashed in a secret offshore account to avoid tax payment may seem justified; however, a Professor of History at the University of Ibadan, Professor Charles Adesina has revealed the detrimental effects of Tax Havens on the economy of developing countries.

Prof Adesina who made this revelation at an exclusive interview on CEOAfrica’s online television programme, Community Today, explained that developing countries are usually the ones that bear the brunt of tax havens and offshore accounts, adding that the practice of keeping large sums of money in secret foreign accounts is unconstitutional and unethical.

In the light of an international conference organised by the Centre for General Studies (CGS) and the Office of International Programmes (OIP), University of Ibadan on the theme ‘Tax Havens and the Developing World: The Global Dimension’, scheduled to hold on the 2nd of August, 2017, Prof Adesina, who is the host of the conference, noted that resources that are meant for the growth of developing countries are being ploughed into tax havens, a practice which enriches the tax haven countries and impoverishes the developing ones.

               Professor Charles Adesina, a Professor of History at the University of Ibadan

Shedding more light on the term ‘Tax Havens’, the Professor of History said “Tax havens are certain places that have created the enabling environment for people who bring in funds from abroad not to pay tax on the funds they bring in. These people are also allowed to register shell companies. There are many countries that serve as tax havens like; Switzerland, Cayman Islands, Jersey Islands and many more. In Africa we have countries like Seychelles and Mauritius who serve as tax havens.

The Professor noted that countries that serve as tax havens not only guarantee secrecy to their clients, but also allow funds and resources from other countries or foreigners to be stored confidentially in their countries without querying the source of the funds nor the purpose of the funds – an arrangement that is beneficial to the tax havens countries – as they can use these resources to develop their countries, while the countries from which the funds are transferred lose these resources.

Problems of Tax Havens

Noting that tax havens are as beneficial to the host countries as they are detrimental to the developing countries, Prof Adesina said “the countries housing the funds have free resources to do certain things within their countries. When you move resources out of your own country for safekeeping in another country because you want to avoid tax payment, it is the other country that will benefit more from the transferred resources or assets rather than your own country.”

While noting that Africa may be losing about $600 billion to tax havens, the Professor explained that the outflow of resources from the continent to tax havens has become worrisome, a factor which according to him, is responsible for the dire poverty, infrastructural collapse, increasing unemployment and other counter-development challenges experienced in many African countries.

“One of the serious factors responsible for poverty, joblessness, collapse of infrastructure in Africa is the outflow of resources from the developing world into tax havens and these resources are no longer available to us to actually change the lives of our people. So we are worried and we now want to see how we can interrogate the tax havens and the developing world as well as sensitise people about tax havens. Perhaps one day, we will get some legislation that will criminalise the activities of those who shift resources out of the developing world to the tax havens,” the Professor stated.

Professor Charles Adesina with the Anchor, Mistura Salaudeen at the Media Chat

Prof Adesina further explained that the revelation of the Panama Papers, the leaked document which publicized information about the financial details of wealth stashed in offshore accounts by people worldwide, including some Nigerian Politicians and businessmen, was a testament to the outflow of billions from Nigerian to foreign accounts and an eye-opener to the reality of tax havens.

Although he noted that some Nigerians who have offshore accounts made their money legally and stowed it away to avoid payment of tax, the Professor however stated that some other offshore account holders make use of tax havens to hide their illegal gotten wealth from the prying eyes of their home government. He stated that many corrupt government officials steal billions of Naira to hide-away accounts and shell companies where the source of their wealth are not questioned and they are guaranteed anonymity.  

“This practice of hiding money in tax havens denies one’s home country so much revenue and resources. If you take this money out of your country, you are denying the government accruable taxes from such funds. The taxes from you and I are infinitesimal, but from someone who has made a profit of $1 billion from an oil bloc, they are significant. If such person takes the profit to a tax haven like; Panama Islands, or Seychelles, then the tax they are so supposed to pay to the Nigerian Government is lost,” noted the Professor.

Government Actions/Inactions

While Prof Adesina noted that the Nigerian constitution forbids public office holders from having foreign bank accounts, it is evident from the leaked Panama Papers that some government officials still have secret offshore accounts. The Professor noted that unless classified tax haven documents are leaked on a regular basis, it might be difficult ascertain those who patronise the services of these tax havens as their secrecy are guaranteed by these countries.

Professor Charles Adesina (Seated Left) with Journalists present at the Media Chat

While lamenting the nonchalance of the Federal Government about investigating Nigerians who own offshore accounts, the Professor of History insinuated that government’s disinterest may be consequent to the fact that many of its officials are guilty of the act. He said “Apart from the Abacha loot, the Nigerian Government is really not trying to pry, apparently because those who have such accounts are their own people.”

He therefore urged the Nigerian Government to take a cue from the United States Government to criminalise the act of using tax havens. He said “The US government is now moving around the world, especially to Switzerland to demand the exposure of Americans who have secret accounts so that they can pay tax back home. So, they are going around the world looking for Americans who have hidden money away. Nigeria should learn from that.”