Wednesday, November 20, 2013

Time to clean up: how Barclays promotes tax havens in Africa

Actionaid has published a major new report looking at the role of Barclays bank in promoting offshore activity in Africa. This blog published selected highlights from the report. But read the entire report: there is a whole lot more in there.

First, by way of introduction:
"Of all the UK banks, Barclays is by far the biggest player in Africa. It has 147 subsidiaries across the continent (four times as many as any other UK bank) and operations in 17 African countries. Barclays has said its ambition is to become the “go-to bank in Africa” and its Africa strategy includes clear commitments on “making more of Africa’s people, our customers and clients”…while at the same time being a “force for good in the communities we serve  and the people’s lives we touch”.

However, our research shows that Barclays’ commitment to delivering responsible investment in Africa is questionable at best. We have identified two examples which show how the bank is promoting the use of tax havens by businesses investing in Africa, including African businesses themselves."
The first example concerns  the Offshore Corporate division of Barclays’ International Wealth and Investment Management.
"Offshore Corporate is promoting a “proposition” to African businesses built around its extensive presence in Africa and its ability to link companies and investors in Africa with Barclays’ operations in offshore locations, all of which offer low taxation and favourable tax regimes.

It exists, in its own words, to help clients “maximise the advantage offered by offshore jurisdictions” and it encourages companies to use the services it offers for tax planning."
The second example concerns Barclays' operations in Mauritius, where Barclays has publicly presented itself as the “pioneer of offshore” and is actively encouraging companies to set up subsidiaries in Mauritius as a route for channelling investment into Africa.
"In its promotional materials Barclays highlights the “favourable local tax regime” in Mauritius and the extensive network of double taxation treaties that Mauritius holds with many countries, including African ones.
. . .
Barclays offshore corporate describes Mauritius as the “offshore centre of choice for India and the Sub-Saharan region.”
. . .
These treaties offer attractive opportunities for offshore companies and international
and limited life companies which are incorporated in Mauritius. These companies may operate administrative headquarters, re-invoicing centres, trading offices, or distribution outlets within the vibrant Mauritius Freeport.” This could easily be read as an invitation to go “treaty shopping”.
Now here is a crucial point, which we have emphasised many times. Banks sometimes like to portray themselves as passive respondents to the wishes of clients, facilitating trade and investment and all that. But it is essential to understand that the world's biggest private banks are actively courting and in some cases aggressively recruiting people in developing countries to take their money offshore. They are aggressively making capital flight and illicit financial flows happen.

Is Barclays a case in point? Well, ActionAid has some hard evidence:
"What is clear from both the brochure, and from staff profiles available on-line, is that Barclays Offshore Corporate is encouraging companies investing in Africa to move wealth offshore.A profile of a senior manager in the tax haven of the Isle of Man makes mention of “opening new client accounts by cold and targeted sales calls”, as well as sales and business development trips to Africa, indicating that these services are being actively promoted on the continent."
The Guardian newspaper, reporting on this report, says:
"If people want to put their money offshore, they'll find a way to do it, but Barclays should stop promoting this. It is inappropriate for a bank looking to be a force for good, and aiming to expand its operations in Africa, to do this," said Toby Quantrill, tax justice adviser at ActionAid."
 And there is more. In 2010 we reported that Barclays was offering
"The Barclays Offshore Banking Unit, the first of its kind in Ghana and indeed Africa south of the Sahara continues to offer world class banking service to non-resident private clients and corporates."
Barclays was the lead promoter of the Ghana project, which has now been shelved. Word on the street has it that Barclays Is Barclays cleaning up its act now? Well, there have been noises to that effect, but evidence so far is rather thin. Back to Actionaid:
"Among the UK banks, Barclays remains one of the most persistent users of tax havens, with 471 subsidiaries listed in tax havens in 2012. Barclays has stated that it is reducing the number of its operations in low tax jurisdictions, with further reductions planned for 2013. But it is not clear on what basis such reductions will be made, or on what timescale. In response to a direct enquiry, a spokesperson for Barclays simply said that the “closure of each subsidiary is judged on a case by case basis.”
And the general background:
"Tax is far more than a simple business concern. It is a global development issue. A recent report from the highlevel Africa Progress Panel estimates that lost taxation is costing sub-Saharan Africa US$63 billion every year.

This lost tax, if paid and targeted effectively, would be enough to reach the UN’s millennium development goals of universal primary education and universal healthcare, with enough money left over to upgrade Africa’s entire road network."
Update 2014: for more information on Enablers and Intermediaries see here.



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