04 November 2013

ActionAid: Deloitte’s tax avoidance advice could cost poor African countries hundreds of millions of dollars

From Starbucks to SAB Miller, and from Associated British Foods to Google, there’s been a constant stream of tax avoidance controversies over the last couple of years.

But who dreams up the tax plans that make this kind of avoidance possible?

The answer is that some of the chief architects include accountancy firms.

These firms not only audit the books of other companies, but also sell them advice on how to minimise their tax bills.

Until now it has been quite difficult to see how this might work in practice – but today we hope to partly answer this by revealing evidence of how Deloitte is advising big business on how to avoid tax in some of the world’s poorest countries by using the Indian Ocean tax haven of Mauritius.

Deloitte earned made more than $32 billion in revenue last year alone – the most money out of any of the Big Four firms.

The kind of avoidance it is advising, which is entirely legal, could be costing African countries hundreds of millions of dollars a year.

It could mean teachers or doctors don’t get hired or roads and sewers don’t get built, keeping whole countries dependent on international aid.

The document we found is called Investing in Africa through Mauritius (pdf) and was part of a presentation which Deloitte made at conference in June this year attended by many large companies.

Using the country of Mozambique as an example, Deloitte showed how withholding tax and capital gains tax could be avoided by structuring a business through Mauritius.

Mozambique is one of the poorest countries in the world, where the average age at death is 49 and 40% of people are malnourished.

However the document is also important for another reason – because it lifts the lid on how big businesses with operations in Africa use the tax haven of Mauritius to avoid tax.

According to one estimate, three times as much money is being lost to tax avoidance globally as developing countries receive in aid each year.

Want to know more about Deloitte and tax?

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