The African continent contains a large portion of the world's metal and mineral reserves and thereby is the owner of valuable natural ressources. Despite a regular boom in the demand for and prices of minerals and metals, the African countries from which the minerals and metals are extracted remain amongst the poorest in the world.
Every day you use products which contain minerals: Glass, electronic equipment, makeup and even your jeans can be manufactured with minerals that are extracted from the African soil. Africa is responsible for a large proportion of the world's gold production. You can find gold everywhere in Denmark. It is in your jewellery, your teeth, on your grandmother's candlesticks, even in your electrical outlets. Not to mention that it weighs heavily in the foreign exchange reserves of the Danish national bank.
Ghana is Africa's second largest manufacturer. However, Danish people's consumption of gold does not benefit countries like Ghana, which according to the UN is amongst the least developed countries in the world. Because with lucrative tax conditions and aggressive tax planning, international mining companies can minimise their contribution to the economy in the West African nation.
For the Ghanaians, the reality is that the international mining companies work against the country's development and bring great costs to the environment as well as the local population. This is demonstrated in the report ”Unrestrained consumption on Africa's expense”, which is the result of a field study conducted by DanWatch in the fall of 2009.
No taxes, no development
Tax money is a prerequisite for creating development in countries like Ghana. Tax money must be used to finance the educational system, infrastructure and healthcare.
In Africa, the international mining companies operate under lucrative tax deals, which the African governments use to attract international investments in the country's mining sector. However, many mining companies do not even pay the lowest tax rate. They take advantage of the many loopholes that can be found in the authorities' tax regulations. This has been demonstrated in several international studies conducted by Christian Aid, amongst others.
Although illegal, the mining companies can get away with declaring lower revenues than they have actually had in order to pay less in taxes than they should. Furthermore, the international mining companies can transfer their profits to tax havens through false pricing. Internal transactions between subsidiaries belonging to the same group give ample opportunity to manipulate with prices. If a subsidiary in Africa buys products from another subsidiary in the same group at an inflated price, the profits can be moved to a country in which taxes are not collected.
Lack of regulation
The African tax authorities only have few resources to control the company's declarations and the international trade within the business group. Because the companies only have to file a single annual account for the entire group, it is impossible to investigate whether the companies are transferring their profits to tax havens through false pricing.
Annual accounts by country, called country-by-country reporting, would give governments, populations and NGOs the opportunity to assess whether the companies pay a fair amount of taxes to the African countries. However, International Accounting Standards Board (IASB), who decide how an account is reported, do not yet require country-by-country reporting.
The lack of control with the mining companies and their possibilities for tax evasion mean that the developing countries each year lose large amounts in tax revenue. Money which could have been spent on development of the poor African mining countries instead creates profits for the large international mining companies.