Beneficial Ownership Transparency in Africa: The State of Play in 2020

Tax Justice Network, June 2020

49 Pages Posted: 27 Jul 2020

See all articles by Rachel Etter-Phoya

Rachel Etter-Phoya

Tax Justice Network

Eva Danzi

Tax Justice Network Africa

Riva Jalipa

Tax Justice Network Africa

Date Written: June 1, 2020

Abstract

Leak after leak has confirmed what African citizens have long suspected: the elite hide their actions and identities to loot state resources and reduce taxes owed. African countries are taking action to domestically address financial secrecy, including requiring the beneficial owners of companies, partnerships, foundations and trusts to register.

In 2015, the High Level Panel on Illicit Financial Flows from Africa, established under the direction of the African Union and United Nations Economic Commission for Africa Conference of African Ministers of Finance, Planning and Economic Development, articulated the entrenched social and economic inequalities which blight many African countries. The High Level Panel was emphatic that the year-on-year hemorrhaging of government revenues was a fundamental obstacle to achieving sustained human development, the fulfillment of basic human rights and the ending of poverty.

Identifying, registering and disclosing the people who ultimately own or control legal vehicles is a key policy for promoting and protecting domestic revenue mobilization that may otherwise be eroded by illicit cross-border financial transactions including money laundering, tax evasion and avoidance, corruption and terrorist financing. Ending anonymous ownership of companies and other legal entities through beneficial ownership disclosure was a key recommendation made by the High Level Panel.

This report examines the state of beneficial ownership transparency in Africa today. It comparatively assesses the registration and disclosure requirements for the ownership of legal vehicles, including companies, partnerships, trusts and private foundations, across 17 African countries as of April 2020, drawing on the data of the 2020 edition of the Tax Justice Network’s Financial Secrecy Index and supplementary research of beneficial ownership legislation introduced after the publication of the index in February 2020.

African countries are making progress towards ending the abuse of corporate secrecy and this paper discusses the state of play and possible next steps of action. Laws requiring beneficial ownership to be registered with a government authority have been enacted in seven of the African countries assessed during this study. However, no country in Africa, or indeed the world, yet achieves the ideal level of beneficial ownership registration for every type of legal vehicle.

Beneficial ownership transparency can be more effective on the continent by improving legislation and implementation in the following ways:

- Beneficial ownership provisions should apply to all legal vehicles in all sectors, including companies, partnerships, trusts and foundations.
- All bearer shares should be prohibited or at least immobilized by a government authority.
- The definition of beneficial owner should not have a minimum threshold, ie, it should apply to every shareholder holding at least one share.
- Legal and beneficial ownership information provided should be comprehensive, accurate and up to date and for the full ownership chain.
- Beneficial ownership registration information should be verified and non-compliance should be met with sanctions.
- Registries housing legal and beneficial ownership information should be made publicly available.

Keywords: Africa, Beneficial Ownership, Illicit Financial Flows, Tax Justice

JEL Classification: F63, O55, O11, P35

Suggested Citation

Etter-Phoya, Rachel and Danzi, Eva and Jalipa, Riva, Beneficial Ownership Transparency in Africa: The State of Play in 2020 (June 1, 2020). Tax Justice Network, June 2020, Available at SSRN: https://ssrn.com/abstract=3640402 or http://dx.doi.org/10.2139/ssrn.3640402

Rachel Etter-Phoya (Contact Author)

Tax Justice Network ( email )

38 Stanley Avenue
Chesham, Bucks HP5 2JG
United Kingdom

HOME PAGE: http://taxjustice.net/

Eva Danzi

Tax Justice Network Africa ( email )

Jaflo Brookside, Bloc C, 106 Brookside Drive,
Westlands
Nairobi, 25112-0100
Kenya

Riva Jalipa

Tax Justice Network Africa ( email )

Jaflo Brookside, Bloc C, 106 Brookside Drive,
Westlands
Nairobi, 25112-0100
Kenya

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