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AfricaMoney | September 22, 2017

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Barclays under fire for promoting Mauritius

Barclays under fire for promoting Mauritius, other tax havens

London-based NGO ActionAid has accused Africa’s largest retail banking giant, Barclay’s Bank, of promoting Mauritius and other tax havens to its clients as preferred investment gateways into Africa and Asia.

Barclays promoted the use of Mauritius and other offshore tax havens as a preferred route for companies investing in Africa, according to a report published today by London-based NGO ActionAid.

With off-shore tax jurisdictions increasingly leveraged by companies to reduce the tax paid in the African countries they work in, the study says that Barclays’ marketing of offshore tax jurisdictions runs contrary to its commitment to be a “force for good”.

Estimates by ActionAid indicate that Mauritius is the largest player in the off-shore financing space, with almost one in every $2 of reported corporate investment in developing countries being routed from or through a tax haven.

Besides, to make matters worse for the UK banking giant, which makes more than 10% of its profits in the emerging continent, a corporate brochure published on Barclays’ website shows a distinct bias for Mauritius. Highlighting the island economy as ‘the experienced and established gateway for investment into Africa and Asia’, the brochure promotes Mauritius as ‘the offshore financial centre of choice for India and the sub-Saharan region.’

Mauritius recently emerged as the highest ranked Sub-Saharan country on the financial secrecy index released by the Tax Justice Network and is well known for its negligible corporate tax rates, and for being a preferred channel for tax-saving for High Net-worth individuals (HNIs) and multinational corporations (MNCs).

Underscoring the tax avoidance potential of the island, the brochure adds that Mauritius offers double taxation treaties with dozens of countries including several in Africa. It also comments on the absence of exchange controls which allow free repatriation of profits and capital with no withholding tax.

For the largest UK bank in Africa, operating in as many as 17 countries and with ambitions to become the ‘go-to bank in Africa’, the ActionAid report entitled ‘Time to clean up: how Barclays bank promotes the use of tax havens in Africa’, comes as a thorn in its side.

Barclays has denied the ‘interpretation of facts’ by ActionAid, stating that the bank does not encourage businesses to set up in any particular jurisdiction. The bank’s spokesman highlighted that tax planning undertaken by Barclays complies with their published tax principles, which are completely above board. He went on to add that this applies equally to activity in Mauritius as it does to the remainder of Barclays’ operations.

Also, while ActionAid does place the bank in a morally grey zone, its report stops short of directly accusing Africa’s largest retail bank of tax avoidance, or indeed, any illegal activity.

However, since donations to poor countries can barely keep pace with tax leaks, taxation has risen up the global development agenda, with the report pinpointing tax as ‘far more than a simple business concern…it is a global development issue.’

The study highlights that African countries lose billions of dollars in unpaid taxes each year, with a recent report from the high-level Africa Progress Panel estimating that lost taxation is costing sub-Saharan Africa a whopping US$63 billion every year.

Accordingly, ActionAid is demanding that Barclays honours its commitment to change and close its Offshore Corporate department, which it uses to promote tax havens to big businesses in Africa. ActionAid also called on Barclays to provide evidence that its activities in tax havens are not linked to tax avoidance and to make its tax strategy public.

The NGO made it clear that as Africa’s largest retail bank, Barclays should be shouldering increased responsibilities towards the region, such as supporting revenue authorities in Africa to strengthen their systems, and helping build their knowledge and capacity.

ActionAid has been consistently reporting on tax avoidance in the region, and the report on Barclays follows close on the heels of its criticism of Deloitte. The global consultancy major was brought to book for advising big businesses on how to avoid paying tax in some of Africa’s poorest countries.

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