1099 Africa's 'special economic zones' are Chinese cities with Chinese workers

Africa's 'special economic zones' are Chinese cities with Chinese workers

Newsletter published on December 31, 2019

(1) Chinese corporations are trying to turn Africa into another Chinese
continent
(2) Africa's 'special economic zones' are Chinese cities with Chinese
workers
(3) Mauritius is the tax haven of Africa

(1) Chinese corporations are trying to turn Africa into another Chinese
continent

https://www.forbes.com/sites/panosmourdoukoutas/2018/08/04/china-is-treating-africa-the-same-way-european-colonists-did/#3df9115e298b

What Is China Doing In Africa?

Panos Mourdoukoutas Contributor

Chinese corporations are all over Africa.  In June 2017 a McKinsey &
Company report estimated that there are more than 10,000 Chinese-owned
firms operating in Africa.

What are Chinese corporations doing in Africa? That's a highly
controversial issue.

The reason Chinese corporations are in Africa is simple; to exploit the
people and take their resources. It’s the same thing European colonists
did during mercantile times, except worse. The Chinese corporations are
trying to turn Africa into another Chinese continent. They are squeezing
Africa for everything it is worth.

This is the view several African politicians have. The Zambian
politician Michael Sata was one of them. At least he was before being
elected President of Zambia in 2011. He wrote a paper presented to
Harvard University in 2007 that said "European colonial exploitation in
comparison to Chinese exploitation appears benign, because even though
the commercial exploitation was just as bad, the colonial agents also
invested in social and economic infrastructure services Chinese
investment, on the other hand, is focused on taking out of Africa as
much as can be taken out, without any regard to the welfare of the local
people." (quoted in Scott D. Taylor's "The Nature of Chinese Capital in
Africa, Current History, May 2018, p. 197)

Sata's bold position got some support by a deadly blast at an explosives
factory partly owned by the Chinese state killing 50 Zambian workers.

Africa’s Equities Have Underperformed Emerging Markets

Globalization managed to skip Africa by for years. There were several
reasons for this. Africa was considered to have poor infrastructure,
political instability, and low income. "The trade in oil, gas, gems,
metals and rare earth minerals wreaks havoc in Africa. During the years
when Brazil, India, China and the other "emerging markets" have
transformed their economies, Africa's resource states remained tethered
to the bottom of the industrial supply chain," writes Tom Burgis in The
Looting of Africa (New York: Perseus Books Group, 2015). While Africa
accounts for about 30 per cent of the world's reserves of hydrocarbons
and minerals and 14 per cent of the world's population, its share of
global manufacturing stood in 2011 exactly where it stood in 2000: at 1
percent.

Everything changed when China came along. The country was desperate for
raw materials and energy to power their growing manufacturing capacity.
They put Africa on the globalization map. The continent was placed right
next to Shanghai in terms of Beijing’s business priorities.

Africa was at the top of the Beijing economic agenda. It was an easy and
convenient target. Chinese leaders sent business delegations to every
capital in Africa year after year. These delegates secured
infrastructure projects and proposed trade deals, converting Africa into
a "second continent" for China. Metaphorically, that is.

Howard W. French describes the situation in the book China’s Second
continent (New York: Alfred A. Knopf, 2015), explaining, "Sensing that
Africa had been cast aside by the West in the wake of the Cold War,
Beijing saw the continent as the perfect proving ground for some Chinese
companies to cut their teeth in international business. It certainly did
not hurt that Africa was also the repository of an immense share of
global resources—raw materials that were vital both for China’s
extraordinary ongoing industrial expansion and for its across-the-board
push for national reconstruction."

The long arm of globalization had touched Africa. Trade between China
and the "second continent" of Africa reached close to $300 billion in 2015.

Not everyone feels that China is attempting to turn Africa into a
Chinese colony though. One such person is Ching Kwan Lee, a professor at
the University of California. Lee argued in the Specter of Global China:
Politics, Labor, and Foreign Investment in Africa (University of Chicago
Press, 2017) that the investments the Chinese state made in Africa
weren’t made as "imperialists" or "colonialists". Nor were ones by
private corporations. Chinese corporations aren’t being motivated by
profits. They have a long-term horizon in mind, and they make for good
local citizens. The Chinese people in Africa pay their fair share of
taxes to the countries they do business with. Lee goes so far as to
contend that Chinese corporations actually promote African independence
and autonomy, rather than the usual dependence that is associated with
colonialism. China is helping Africa to stand by themselves, rather than
making Africa dependent on them.

Maybe it would be best to avoid sharing this opinion with the Pakistanis
and Sri Lankans that are heavily indebted to China. These are the people
that are most at-risk of becoming modern-day colonies for Beijing.

Panos Mourdoukoutas

I’m Professor and Chair of the Department of Economics at LIU in New
York. I also teach at Columbia University.

(2) Africa's 'special economic zones' are Chinese cities with Chinese
workers
http://endoftheamericandream.com/archives/the-takeover-china-is-building-enormous-self-sustaining-chinese-cities-all-over-the-african-continent

China Is Building Enormous Self-Sustaining Chinese Cities All Over The
African Continent

December 30, 2019

by Michael Snyder

During colonial times, European powers exploited Africa for the vast
resources that it possesses.  But what China is doing today is actually
much worse.  Yes, the Chinese greatly desire African resources, but
ultimately what they want is Africa itself.  But instead of conquering
Africa using military force, China is using economics instead.  Today,
more than 10,000 Chinese-owned firms are operating in Africa, and
virtually every major road, bridge, railway and skyscraper is being
built by the Chinese.  As a result, most African nations are very deeply
indebted to China at this point.  And as you will see below, when those
debts go bad that gives the Chinese a tremendous amount of leverage.


Many people believe that the endgame for China is to make a whole lot
more money and to gain control over a whole lot more resources.  And
China is undoubtedly pursuing those goals, but as Forbes has noted,
ultimately what this is about is turning Africa "into another Chinese
continent"…

The reason Chinese corporations are in Africa is simple; to exploit the
people and take their resources. It’s the same thing European colonists
did during mercantile times, except worse. The Chinese corporations are
trying to turn Africa into another Chinese continent. They are squeezing
Africa for everything it is worth.

Right now, approximately two million Chinese citizens already live in
Africa, and that number is steadily rising with each passing month.

These days, it is difficult to find a major construction project on the
continent that is not being handled by the Chinese, and this has enabled
them to put their imprint on some of the largest African cities.  For
example, just check out what is happening in Nairobi, Kenya…

On the outskirts of Nairobi, Kenya, a small sign points to "Beijing
Road," where a new housing development called the Great Wall Apartments
looks like the concrete towers you’d find in a Chinese city.

Across Africa, Chinese developers are building highways, light rail
systems, apartment buildings, and entire cities.

Most of the "cities" that China is building are known as "special
economic zones".  These "special economic zones" are essentially
enormous self-sustaining Chinese cities that have been dropped right
into some of the most strategic parts of Africa.  For example, one of
the biggest has been built right next to Lagos, Nigeria…

Next to Lagos, Nigeria, Chinese developers have built a walled-off
"special economic zone"–basically a separate city, with separate rules
designed to attract investors–based on a model they’ve used inside China
for the last 30 years. After Shenzhen became a special economic zone in
the 1980s, it went from a small town of 20,000 to, by some counts, 15
million today.

In these "special economic zones", you will find Chinese factories
staffed with Chinese managers that are supervising Chinese workers that
are using Chinese equipment to make their products.

And the size of some of these projects is absolutely staggering.  Just
check out what has been planned for an area along the coast of Tanzania…

Bagamoyo, if the project goes ahead as planned, will be transformed into
the largest port in Africa. That is looking ever more likely: after
years of delay, the Tanzanian government says it is in the final stages
of talks with state-run China Merchants Holdings International.

The lagoon will be dredged, to allow access to the vast cargo ships that
will queue many miles out to sea. As for the special economic zone, the
original masterplan shows factories in a fenced-off industrial area, and
apartment blocks to accommodate the estimated future population of
75,000. There is even talk of an international airport. Many of the
villagers have already accepted compensation for the loss of their homes.

Of course Chinese development is definitely not limited to these
"special economic zones".  In Ethiopia, the capital city of the entire
nation is literally becoming known as "the city that China built"…

Cars chug through the city on smooth Chinese roads, Chinese cranes lift
the skyline, sewing machines hum in Chinese factories in Chinese-owned
industrial parks, tourists arrive at the Chinese-upgraded airport and
commuters ride modern Chinese trains to work.

Simply put, Addis Ababa is becoming the city that China built — but at
what diplomatic and economic cost?

Are you starting to get the picture?

As the western world sleeps, the Chinese are literally taking over an
entire continent.

And as they increasingly dominate the landscape economically, they are
bringing their culture with them as well…

Chinese influence also goes beyond physical infrastructure. Now it’s
possible to pick up a copy of China Daily, China’s state-run newspaper,
in some African cities, and watch CCTV, China’s state-run news channel.
Some cities have Chinese language schools, and some African students are
given grants to go study in China.

Apologists for China could point out that all of this development has
pulled millions of Africans out of poverty.

And that is true.

But all of this development also carries with it a very hefty price tag…

China is now Africa’s biggest trade partner, with Sino-African trade
topping $200 billion per year. According to McKinsey, over 10,000
Chinese-owned firms are currently operating throughout the African
continent, and the value of Chinese business there since 2005 amounts to
more than $2 trillion, with $300 billion in investment currently on the
table. Africa has also eclipsed Asia as the largest market for China’s
overseas construction contracts. To keep this momentum building, Beijing
recently announced a $1 billion Belt and Road Africa infrastructure
development fund and, in 2018, a whopping $60 billion African aid
package, so expect Africa to continuing swaying to the east as economic
ties with China become more numerous and robust.

Needless to say, the Chinese are not doing all of this out of the
goodness of their hearts.  African governments are going very deep into
debt in order to afford all of this infrastructure, and several of them
are now in way over their heads…

There have already been warning signs: the $4 Addis Ababa-Djibouti
Railway ended up costing Ethiopia nearly a quarter of it’s total 2016
budget, Nigeria had to renegotiate a deal with their Chinese contractor
due to their failure to pay, and Kenya’s 80% Chinese-financed railway
from Mombasa to Nairobi has already gone four times over budget, costing
the country upwards of 6% of it’s GDP.

This is the sort of predatory lending that western powers once did so
well, but now China has taken things to an entirely new level.

And once China has an African government by the throat, they can be
absolutely ruthless…

There have been credible reports of talks between the Zambian government
and China on handing over the country’s national electricity company,
ZESCO to the Chinese due to the inability of Zambia to meet its loan
repayment promises. This is expected as China is already in control of
the country’s broadcasting company, ZNBC. There are also fears the main
airport in Lusaka could be the next target.

Obliviously, Zambia is in trouble. And for other African beneficiaries
of Chinese loans, they should prepare for the same possibility in the
eventuality that they aren’t able to repay China.

Basically, Zambia is in the process of becoming totally owned by China.

And this is going to happen in country after country until someone stops
them.

But who is going to stop them?

After all, the U.S. is about a trillion dollars in debt to the Chinese
at this point.

When it comes to foreign policy, China is playing chess while most of
the western powers are playing checkers.

They are literally running circles around us, and we are so clueless
that we don’t even understand what is happening.

(3) Mauritius is the tax haven of Africa

https://www.icij.org/investigations/Mauritius-leaks/whats-a-tax-treaty-and-why-should-i-care/

What’s A Tax Treaty And Why Should I Care?

What are all these ‘double taxation agreements’ or ‘tax treaties’ we
keep seeing in Mauritius Leaks?

NEWSLETTER

JULY 25, 2019

Will Fitzgibbon

Soon after we started searching hundreds of thousands of files sent
anonymously from the island nation of Mauritius, we asked ourselves:
What are all these "double taxation agreements" or "tax treaties" we
keep seeing?

Time and time again, we read emails and documents from lawyers and
multinational corporations asking to use treaties between Mauritius and
countries in Africa, Asia and the Middle East to reduce taxes paid to
the other countries.

But what are they? How do they work? And why are they so controversial?

ICIJ spoke to Martin Hearson, lead researcher on international tax at
the International Centre for Tax and Development based in Brighton,
England, at the Institute of Development Studies.

What is a tax treaty?

There are about 3,000 of these bilateral agreements around the world.
The main function is to carve up the right to tax businesses and people
who earn money across borders and divide up that tax between two states.

What is the purpose of a tax treaty?

Tax treaties really came into being about 100 years ago as business
started to become more international. Businesses started to find they
were receiving tax claims by multiple states for the same money. The
idea was that they should only pay taxes once. States signed these
agreements to make clear in what situations one state would get taxes
and in what situation the other state would get taxes.

That original reason is no longer quite as important as it was in the
first half of the 20th century. Today, most large capital-exporting
states already take steps unilaterally to prevent people and businesses
who make money abroad from paying tax twice. They offer a credit for any
taxes paid abroad or they just exempt foreign income.

However, that original reason for wanting to avoid double taxation is
not entirely gone, because there are always going to be some differences
in the way that countries treat profits.

Recommended reading

Treasure Island: Leak Reveals How Mauritius Siphons Tax From Poor
Nations to Benefit Elites

It Takes a Village to Create a Tax Dodge

ICIJ Publishes List of Mauritian Companies Used by Conyers’ Corporate
Clients Apart from avoiding double taxation, why do countries sign them?

The other main function of tax treaties, especially from the perspective
of developing countries, is about tax competition. Tax treaties are
effectively an incentive offered only to investors from a particular
country. Many treaties signed by developing countries were done in the
hope of attracting investment.

This helps understand why they are signed, but also perhaps why
developing countries have been reluctant to rock the boat when their tax
treaties are abused. I think there’s a balancing act in the mind of
politicians who want to attract investment but also want to be able to
tax that money.

Tax treaty? Double taxation avoidance agreement? DTT? Double taxation
treaty? DTAA? What’s with all the confusing terms and abbreviations? I
don’t call them double taxation treaties. I call them tax treaties.
Because helping companies avoid paying double tax is not really the main
thing that they do. The main thing they do is to take a set of standards
for taxing companies, that was developed among the wealthy OECD states,
and turn it into hard, enforceable law. This often doesn’t seem to work
very well for African countries.

How did tax treaties go from being about avoiding double taxation to
facilitating double non-taxation?

It’s the use of the tools – designed for one function – to do something
different to get around paying taxes at all or at least to reduce taxes.

When states sign a tax treaty, they voluntarily accept restrictions on
their ability to tax cross-border transactions. Those restrictions are
legally binding.

As tax havens emerged, and certain states realized they could use
international tax efficiencies to attract business, businesses and tax
advisers also realized they could minimize the tax they had to pay
around the world.

So, the same restrictions that states had accepted on their ability to
tax cross-border payments were now the main instruments being used to
prevent those states from taxing them at all. Or to prevent states from
taxing them in ways the state didn’t intend when it signed that treaty.

The terms of tax treaties are public. If nothing is secret about them,
what’s the problem?

There’s a difference between tax avoidance and tax evasion. People often
tend to think about tax havens in terms of this secret space where money
gets hidden.

In order to evade taxes, which means you want to break the law by not
declaring income that you should, you need to hide it.

Tax avoidance, on the other hand, exploits the way the law is written.
For example, a tax treaty  can be used to gain an advantage which wasn’t
the original intent of the treaty. The tax authority isn’t able to do
anything about that in the immediate term because the taxpayer is
legally entitled. In the longer term, what you need to do is change the
law. You need to change the tax treaty, which is hard to do because you
need both sides to agree to it.

In the case of Mauritius, it’s been difficult for countries to persuade
Mauritius to include in the treaty the kind of wording you need to
prevent it being used to avoid taxes. Mauritius has been reluctant to do
that, which would allow African countries to tackle tax avoidance.

What does the research tell us about Mauritius

The bottom line for an African policymaker is that there is no reliable
evidence to support the idea that signing a particular tax treaty will
bring investment into a country.

There are some studies that suggest some kind of effect, there are
others that suggest no effect and even some studies that suggest a
negative effect. We don’t have convincing consensus that tax treaties
bring investment to poorer, developing countries.

Between developed countries, it’s a bit different. In that case, because
investment flows are much more complex, the scope for double taxation is
higher. So I think there is evidence to support the idea that treaties
work. But for an African country, the evidence is not there.

You have to look at each treaty in terms of the tax systems of the two
signatories and the economic activity between them to understand whether
it’s really necessary.

« Page 1 of  26 »

Who or what was behind promoting tax treaties, and why?

The emergence of the tax treaty regime begins with a combination of two
drivers, which are still very active today.

First, multinational companies, which still say: ‘We’d like to invest
here, but we’d like a tax treaty to lower our taxes.’ Lobbying by
businesses is still a very strong driver of the expansion of the tax
treaties.

Second, a combination of lawyers, tax professionals, negotiators and
civil servants. This community of people – from the very beginning –
have drafted and negotiated treaties and formulated the concepts and the
narrative about why they matter. This community is still very active
today in terms of championing the idea that tax treaties are a good thing.

What about the Organization for Economic Co-operation and Development,
IMF, African Union?

In the last 50 years, during which the African continent has become
increasingly covered by tax treaties, there are periods of time in which
there has been an active effort by international organizations to
promote tax treaties.

In the 1990s, the OECD was active in trying to reach tax administrations
in Africa and encourage them to negotiate tax treaties. UNCTAD, the
U.N.’s trade and investment body, also promoted tax treaties as a means
of promoting investment.

In the present day, the World Bank and IMF are much more skeptical
because they’ve seen the evidence. The OECD is now promoting a package
of international agreements and initiatives of which tax treaties are
just one part.

Why does so much tax treaty research focus on developing countries? One
of the reasons we focus on developing countries is that it’s less clear
what they’re getting from tax treaties.

Another reason is that the kind of tax-avoidance schemes that developing
countries face tend to be less complex and to rely on fairly simple tax
treaty clauses. This makes tax treaties one of the main instruments used
to avoid tax in developing countries.

The final point is that developing countries are at a big disadvantage
in terms of their capacity to tackle this, because their domestic law
and their administrative capacity may not be as well-developed as those
of developed countries, leaving them open to treaty-shopping structures
which wouldn’t necessarily work in a developed country.

Tax treaties do this really strange thing. They take something that we
consider to be a fundamental part of our democracy – tax policy and tax
rates, which elections are won and lost over – and they take it out of
the hands of politicians. They lock it down in a binding treaty, which
often has been negotiated by bureaucrats and rubber-stamped by
politicians, rarely with any parliamentary scrutiny.

If you care about democratic control of how big corporations are taxed,
then understanding how much of that happens without politicians being
able to control it is one reason you should care.

How would you describe Mauritius’ role in the international landscape of
tax treaties?

Mauritius is the lynchpin of many tax avoidance structures in Africa.
There are other jurisdictions involved, like the Netherlands, but
Mauritius is really the top of the list. And the position that Mauritius
occupies is really down to its tax treaties.

Mauritius is one of a number of small island states that has realized
that financial services is one sector in which it can compete. It’s
decided that the way it’s going to establish that is through a network
of tax treaties. The strategy of enabling tax avoidance as a way to
achieve that is the choice Mauritius made.

It’s amazing when you look at it how many African countries have
treaties with Mauritius, given that those treaties open those countries
up to the risk of tax avoidance. Mauritius is an African country, and I
think it has used that status to give it a sense of legitimacy.

I think Mauritius is the African tax haven. It’s the country that you
use if you want to avoid taxes in a large number of African countries if
you’re a multinational investor. It’s the tax treaty network that gives
it that.

What can or should Mauritius do?

It’s a really pivotal moment. Governments, through the OECD, have agreed
on a way to change tax treaties that will make it harder for companies
to avoid tax and easier for tax authorities to stop it.

Mauritius hasn’t been particularly forthcoming in its willingness to see
its treaties with African countries amended. It’s managed to avoid being
blacklisted by the OECD and the EU. It’s done that through some clever
changes to the way its tax system works so that they comply with the
letter of the rules but not necessarily the spirit.  It looks like
Mauritius is doing its best to continue to play this role of being a
conduit for tax avoidance in Africa.

I think what Mauritius should be doing is two things. One is cleaning up
its act. That is, accepting that while there are reasons to have
financial centers, the tax-avoidance dimension needs to go. Then also
looking at diversifying its economy; Mauritius is still a developing
country, and it needs to look at alternative strategies for development.

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