Sir Bob Geldof is famously keen for Western governments to give aid to Africa. The world discovered this week, however, that he’s less keen on actually paying taxes to those African governments himself.
The musician and anti-poverty activist’s African investment fund was among hundreds of companies named in the Mauritius Leaks, a trove of 200,000 files leaked from a law firm in the Indian Ocean tax haven to the International Consortium of Investigative Journalists, and shared with Quartz and others.
The documents had one overarching theme: Big Western multinationals reaping as much profit as possible from India and Africa, then depriving their governments of tax revenue through extraordinary accounting contortions.
The sums involved are colossal. Back in 2013, America’s biggest venture capital firm, Sequoia Capital, boasted it had routed $1.2 billion into Indian startups via the tiny island, which offers an effective 3% tax rate for foreign multinationals. It’s unclear how much tax Sequoia avoided, but the files show it taking “pretty aggressive”—and head-spinningly complex—measures stretching all the way to Singapore.
Such machinations lose poorer countries up to $100 billion per year—or around 6% of Subsaharan Africa’s GDP. In Uganda, where the average person lives on $2 per day and fragile tax systems rely heavily on corporate tax, losing that revenue can be crippling. “One little wad of cash can be the difference between a poor country building big infrastructure or not,” a Ugandan tax official told ICIJ. For many, this equates to Mauritius selling out the rest of Africa, with other African governments and businesspeople often complicit.
To see what that means on the ground, look no further than Aircastle, a Connecticut-based plane-leasing company, which likely avoided $14.8 million in South African taxes over four years. That stash could have paid Johannesburg’s yearly social housing budget twice over.
The Mauritius Leaks scandal bolsters efforts led by India to force multinationals to pay tax where economic activity is actually happening by changing global tax rules. The problem had long seemed intractable, with the US nixing any attempts at substantive change. But with New Delhi and others threatening to cause headaches for giant companies by passing their own unilateral tax laws, the powers-that-be are genuinely considering systems that would dent the profit-shifting status quo. Whether they can find a deal that 129 countries can agree on, however, is no sure thing.
This essay was originally published in the weekend edition of the Quartz Daily Brief newsletter. Sign up for it here.
Read more of Quartz’s reporting on how the Mauritius Leaks expose global tax avoidance.