Tuesday, January 18, 2022

Botswana ranks high in secretive, illegal financial deals

Botswana has been ranked the fourth most ‘secret’ country in Africa, where cagey and illicit financial transactions thrive, according to the 2011 Financial Secrecy Index (FSI) launched in Paris, France last week.┬á

Tax Justice Network (TJN), an international Non Governmental Organisation, which initiated the index to investigate global financial secrecy, has for the first time identified Botswana among aggressive purveyors of financial secrecy in Africa and the world.

The index ranked Botswana fourth with a score value of 121.3 after, Malaysia (319.377) Liberia (316.981) and Ghana (146.8, 79).

TJN assessed how secretive the countries’ international treaties, laws and regulations are. The assessment was given in the form of a secrecy score: the higher the score, the more secretive the country.┬á

Out of the 73 researched countries, it ranked Botswana 49th, a position which categorises it close to countries that most aggressively provide secret and illicit financial flows in the global financial system.

TJN indicates that after establishing the International Financial Services Centre (IFSC) in 2003, Botswana got rid of foreign exchange controls, something which has facilitated easy transfer and repatriation of swindled profits.

The 2010 Harvard International Review recently noted that Botswana is on a sure path to become a strong secrecy jurisdiction which through the continent’s siphoned development revenue is funnelled. It is already a conduit for more dirty money from South Africa, Zimbabwe and the rest of the region.

After the IFSC was set up in 2003, foreign clients have evaded corporate tax using the trick of mispricing. Even though the index fell short of figures of lost tax revenue by the country, it estimated that tax dodging by multinationals costs developing countries some $160bn in a year ÔÇô one-and-a-half times the amount they receive from rich countries in aid. TJN warned that tax havens also exacerbate resource curse which can hit Botswana as it depends on commodities exports.

It states that a legal and regulatory framework review has revealed a number of serious deficiencies which make it impossible for effective exchange of information in tax matters.

To squeeze information from the secretive sectors of the country, in most cases you must have already know the information, before you ask for it. This is not effective information exchange. It places Botswana among countries which play a pernicious and aggressive role undermining AU and EU efforts to promote financial transparency.

“It is deeply worrying to see Botswana and other new entrants from Africa being encouraged in some quarters to move towards tax haven status emerge given the damaging effect tax haven secrecy has on developing countries. Until recently, Mauritius was the only African tax haven,” said the Coordinator of TJN, Africa, Alvin Mosioma.

“Such efforts undermine the ongoing process at the African Union to address corruptive practices such as illicit financial flows from the continent.”

According to TJN, FSI was initiated to complement Transparency International’s Corruption Perceptions Index (CPI).

While CPI focused on bribe-taking in the public sector and ranks countries in illicit financial flows as the most corrupt, FSI examines the countries which encourage and facilitate the illicit financial flows by providing a secretive environment that blocks investigations by relevant authorities.

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