Why Tanzania is now haven for secret offshore accounts

What you need to know:

  • But the development is bad news to the fight against tax evasion and illicit financial flows, Tax Justice Network Africa (TJNA) deputy executive director Jason Braganza said in Dar es Salaam recently when presenting a report entitled Financial Secrecy Index 2018: Is Tanzania doing enough to fight Illicit Financial Flows (IFFs), at a breakfast debate hosted by Policy Forum.

Dar es Salaam. Tanzania is now an attractive offshore destination for foreign billionaires seeking to hide their wealth from the taxman in their countries, thanks to the inadequate legal framework that has encouraged financial secrecy.

It is Tanzania’s reluctance to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MATM), the withdrawal from the Open Government Partnership in 2017 as well as the lack of a comprehensive legal framework to ensure disclosure of beneficial ownership of companies registered in the country that have sealed Tanzania’s place as a significant off-shore destination in the region, especially for wealthy Chinese and Indians.

But the development is bad news to the fight against tax evasion and illicit financial flows, Tax Justice Network Africa (TJNA) deputy executive director Jason Braganza said in Dar es Salaam recently when presenting a report entitled Financial Secrecy Index 2018: Is Tanzania doing enough to fight Illicit Financial Flows (IFFs), at a breakfast debate hosted by Policy Forum.

Not signing MATM means Tanzania is not obliged to providing financial information on companies or individuals with funds in Tanzanian banks and financial institutions.

“The lack of agreements with regards to information exchange has made it a lucrative country for companies and individuals seeking offshore accounts,” another report, authored by Ruth Wamuyu and published in January says.

Ironically, according to the Tax Justice Network Africa, the secrecy in the financial sector in Tanzania had been “out of the limelight” to investors who usually prefer secretive jurisdictions, until recently.

Mr Braganza said Tanzania’s high financial secrecy was highlighted by a high score in the Financial Secrecy Index (FSI) 2018 that was published in January.

In the report, Tanzania scored 73 points and ranked 75th in the 2018 FSI out 112 countries surveyed.

Mr Braganza said Tanzania scored 50 points in areas of registration of trusts and foundations and in wealth ownership, which indicated that the level of transparency in the two components stood at half way, meaning they were neither good nor bad.

Likewise, he said the FSI 2018 suggests that the country scored above 50 points in the components of tax administration capacity (63) and public statistics (70), respectively. This was an indication that much efforts were needed to eliminate secrecy in the said components.

“Regarding avoiding promotion of tax evasion and harmful structures, the country scored 50 points, which means the components were neither open nor secret,” he said.

He said much was required to be done in the international standards and cooperation category as the anti-money laundering scored 87 points, which meant that the problem was still alarming.

According to him, the country collected 49 points in the international legal cooperation, which was a positive move towards attaining zero secrecy status in the component.

Speaking during the breakfast debate, the Tanzania Revenue Authority (TRA) assistant manager responsible for the International Taxation, Mr Kayobyo Majogoro said Tanzania’s battle against illicit financial flows and tax evasion received new momentum since President John Magufuli came to power.

“Drug traffickers and individuals shipping in or out large sums of money are stopped at the borders as witnessed by recent events at the Julius Nyerere International Airport,” he said.

Ms Grace Masalakulangwa from the Interfaith Standing Committee on Economic Justice and Integrity of Creation said the continent had a long way to go because corruption beyond country borders were extremely huge.