Ghana, the next tax haven?
Ghana, it seems, is in cahoots with Barclays bank to set itself up as a tax haven. A story about this has just appeared in the Accra mail. It contains some unusual arguments which are worth considering - but the overall message from the argument is rather poisonous. Here is an excerpt:
There is something about offshore banking that puts a question mark on the venture; its attraction for shady characters like drug lords, corrupt officials and tax evaders. Citizens are justified in claiming that the ill-gotten wealth that these leaders siphon off Africa accounts for some of the reasons why Africa remains impoverished to this date.
But offshore banking in Ghana need not impoverish Africa. It could be very welcoming indeed if all stolen monies found their way to Ghana and therefore stayed in Africa. Such a marvelous role reversal would turn Ghana into the "Robin Hood" of offshore banking. The problem for Ghana, however, is that no African with large sums of illicit money to hide will put it in her bank or in an African bank. President Felix Houphet-Boigny of the Ivory Coast was once noted to have declared loudly his preference for Swiss banks. To his credit, he pulled out from these banks some of his money, estimated at $150 million, to build a Roman Catholic Basilica in the Ivory Coast in an attempt to purchase spiritual redemption.
We share the outrage about the way some western banks have acted as fences for kleptomaniacs, tax evaders and others sucking capital out of Africa, but we have absolutely no sympathy for the idea that the best solution is "if you can't beat them, join them." This development will be a very negative step indeed -- both for Ghana's citizens (who will see a large new secrecy space open up in their economy, and an inflow of funds causing "Dutch Disease" effects of increased inequality and reduced manufacturing and agriculture) as well as for the citizens of the wider region, which will see their politicians having scope for access to all kinds of new corrupt schemes. It seems unlikely that American, European and Latin American depositors will place large funds in an African bank, or even the African branch of Barclays, and the most likely outcome will be regional capital flight.
Now consider this. Ghana has just discovered quite a lot of offshore oil. Ghana's president John Kufuor recently hailed this development:
Even without oil, we are doing so well... With oil as a shot in the arm, we're going to fly.
These are reminiscent of the words of Nigerian president Olusegun Obasanjo in 1979 (his first stint as Nigerian president during the oil boom), when he predicted that Nigeria would harness its oil and be among the world's ten leading nations by the turn of the century. We all know what happened to that dream. When poor countries discover oil, the politicians always predict that "it will be different this time" and that they will diversify the economy away from oil. Then oil, because of the varied effects of the "Resource Curse," oil tends to kill off other sectors of the economy, leaving it ever more dependent on the resource, as inequality and unemployment rise.
Ghana, then, risks falling into many of the traps that have plagued Nigeria. And now it wants to be a tax haven too. Imagine Nigeria as a giant, oil-fired tax haven. Could this be Ghana in ten or fifteen years' time? What a horrible thought. Shame on you, Barclays.