International Tax Law and the Legacy of Colonialism

By: Madelyn Hughes, Associate Editor, Vol. 27

During the 1884 Berlin Conference, European powers including Britain, France, Spain, and Belgium met to carve up the African continent to create colonies in what was known as the “Scramble for Africa.”[i] For decades after this conference, African countries were stripped of their natural resources and subjected to European rule enforced by violence, primarily to create capital for colonizers.[ii] For example, surplus money made by West African farmers was forcibly held in bonds by the British government in order to help the British economy recover from war.[iii] Years of exploitation have had lasting impacts on the cultural and economic development of countries throughout the world.[iv] Although colonialism in Africa has now officially ended, its legacy persists in today’s global economic inequality.

The current international tax regime is a continuation of the colonial legacy of exploitation. Tax havens, which are countries that offer foreign investors low taxes to encourage investment, play a significant role in this exploitative system. Tax haven countries developed during the colonial disinvestment period in the 1950s and 1960s, beginning with the Bahamas, Kenya, and Zimbabwe.[v] As colonies began gaining independence, white settlers disinvested from the colonies because they did not think that colonized Africans would be capable entrepreneurs, and they did not want to risk losing the assets they had taken from the colonies.[vi] The settlers sent their assets abroad to countries with lower taxes than Britain or France, marking the creation of what we now refer to as tax havens.

This tax regime has resulted in a new scramble for Africa, reminiscent of the Berlin Conference, in which multinational corporations are competing for access to lower taxes.[vii] Countries throughout Africa have lost billions of dollars due to practices such as tax avoidance and illicit financial flows, including tax evasion.[viii] This capital flight has been described as “a modern-day reincarnation of the colonial state-led plunder of the continent’s natural resources.”[ix] Capital flight is an even more pressing issue now, as the COVID-19 pandemic has wreaked havoc on economic development in the continent.[x]

When multinational corporations take advantage of tax havens, resource-rich countries, such as the Democratic Republic of the Congo[xi], Mozambique, and Tanzania[xii], lose significant amounts of tax revenue due to the manipulation of transfer pricing. This takes the form of tax avoidance or tax evasion, both of which are possible because of the infrastructure created by the law.[xiii] Tax avoidance is “the use of legal provisions and planning to minimize the amount of taxes an individual or corporation owes.”[xiv] Tax avoidance is a legal process that includes claiming multiple tax deductibles, shifting profits to locations that have very low tax rates and limiting financial transparency through shell companies.[xv] Tax evasion, the illegal underpayment of taxes, feeds the illicit financial flow of capital that leaves tax havens.

Both tax evasion and tax avoidance create a system in which multinational companies are allowed to pay less taxes in their home countries, resulting in detrimental effects on the developing countries’ tax revenues.[xvi] The United Nations High Level Panel on International Financial Accountability, Transparency, and Integrity published a report that determined illicit financial flows “worsen inequalities, fuel instability, undermine governance and damage public trust. Ultimately, they contribute to States not being able to fulfill their human rights obligations.”[xvii]

Tax evasion and other illicit financial flows have caused many African countries to lose more money than they receive in development aid or direct investment.[xviii] Over the past 50 years, these tax havens have lost more than $1 trillion in illicit financial flows.[xix] In 2010 alone, Nigeria, Angola, and Cote d’Ivoire lost a total of eleven billion dollars in tax revenue due to avoidance from multinational firms.[xx] Tax avoidance wears down the countries’ fiscal sovereignty. This places pressure on countries to keep their tax rates low in order to receive economic investment from these corporations or individuals, even if it means they are receiving significantly less money than they should. As a result, many African countries are facing the erosion of their tax base, with detrimental results. Most countries rely on taxes for providing essential public services such as healthcare, education, utilities, and social protections;[xxi] and these services can be the difference between life or death for those who cannot afford them. Moreover, the amount of money lost due to illicit financial flows would be enough to fill half of the financing gap that would allow many countries to achieve their Sustainable Development Goals and address issues such as poverty and gender equality.[xxii]

Eroded tax bases disproportionately impact African countries because most of these countries have little recourse. They have very little bargaining power to reform international tax law due to the “embedded inequality” in the current international tax regime that leaves many African countries vulnerable to the scramble for tax havens and unable to influence the leading Organization for Economic Cooperation and Development (OECD), the body responsible for making the rules of international tax.[xxiii] Additionally, political leadership in most of the affected countries does not provide a pathway to reform. Leaked documents known as the Paradise Papers revealed that leaders such as the head of the Nigerian Senate participate in tax avoidance by holding their money in offshore sites, which gives them little incentive to advocate for financial transparency,[xxiv] and it has been reported that high ranking government officials have accepted bribes from companies to keep their taxes low.[xxv]

Lower tax revenue leaves African countries with a weak infrastructure and a lower capacity for tax administration, which makes the investigation and enforcement of tax law violations difficult.[xxvi] Various countries throughout Africa are being stripped of their resources and receiving inadequate compensation, “leaving behind an impoverished population and a devastated environment,”[xxvii] and perpetuating the global inequality that began with the colonial conquests centuries ago.

African countries bear the costs of capital flight due to tax avoidance and evasion, but every country would benefit from improving international financial transparency. Reforming the international tax regime would not only result in progress for eradicating global poverty but would also help repair the continuing harm of colonialism by providing African countries the ability to collect tax revenue that is proportionate to what has been taken from them.

[i] Catriona Davies, Colonialism and the ‘scramble for Africa’, CNN (Aug. 12, 2010, 6:58AM),

[ii] Id.

[iii] Id.

[iv] See Alan Cowell, Colonialism Bloodshed and Blame for Rwanda, New York Times (Apr. 10, 2014).

[v]  Vanessa Ogle, Tax Havens: Legal Recoding of Colonial Plunder, The Law and Political Economy (LPE) Project (Nov. 10, 2020),

[vi] Id.

[viii] Léonce Ndikumana, Capital Flight from Africa: Resource Plunder and the Poisoned Paradises in Tax Havens, Tax Justice Network (Mar. 24, 2021),

[viii]  Al Jazeera, Tax evasion and theft ‘rob Africa’ of $89bn a year: UN study (Sep. 28, 2020),

[ix]  Supra n. vii.

[x] Id.

[xi] Kate Harisine, Paradise Papers Reveal How Tax Havens Damage Africa, DW, (Nov. 9, 2017),

[xii] Antonio Cascais, Africa’s Problem with Tax Avoidance, DW (June 16, 2021),

[xiii] Supra n. v.

[xiv] Gugu Resha, Lessons from the Pandora Papers: How the World’s Elite Keep Africa Poor Through Tax Avoidance and Aid, Africa Portal (Oct. 13, 2021),,book%20The%20Hidden%20Wealth%20of

[xv] Id.

[xvi] Rachel Etter-Phoya & Chenai Mukumba, Africa and the Corrosive International Tax System, Tax Justice Network, (May 18, 2021),

[xvii] Report of the High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda, Financial Integrity for Sustainable Development, VIII.

[xviii] Supra n. xiv.

[xix]Supra n. xvi.

[xx] Supra n. xiv.

[xxi] Supra n. xiv.

[xxii] Supra n. xiv.

[xxiii] Supra n. xvi.

[xxiv] Supra n. xi.

[xxv] Supra n. xii.

[xxvi] Supra n. xii.

[xxvii]Supra n. xvi.