South Project

The rise of illicit financial flows and base erosion profit shifting (IFFs and BEPS) as common practice has had a disproportionately negative effect on countries in the Global South. Many of these countries are heavily indebted at a time when raising more revenue for development is more needed than ever, especially when responding to the economic and social crises triggered by the COVID-19 pandemic. Not unrelated to the problem of IFF and BEPS, countries have unwaveringly stuck with political-economic growth paths which have left their economies - and by extension their fiscus - reliant on large transnational corporations operating mainly in the extractives sector. Within this context, the haemorrhaging of finances resulting from IFFs and BEPS has resulted in a draining of tax revenues, a worsening of debt, and a lack of adequate public spending.

Civil society from around the world have made massive contributions towards our understanding of IFFs/BEPS in recent years, and continue to put pressure on governments and international bodies to act. However, there has been relatively little work done in order to make this information accessible, or to find means of resistance at a case by case or company by company level. 

This is important, because IFFs and BEPS are not just tax issues that can be left for policymakers and tax experts alone. The lives of people living and working in and around the subsidiaries of TNCs continue to be affected in serious ways through these practises: Profit shifting deprives local subsidiaries of resources for improvements in wages and working conditions (wage evasion), while also allowing these subsidiaries to avoid their obligations to community development and environmental rehabilitation, especially in the case of extractive industries. In the end, it is workers, communities, and those reliant on quality public services who lose the most, and so it is vital that they be capacitated to understand and resist these outflows from a grassroots level.

In 2019, the Association of Mineworkers and Construction Union (AMCU) filed litigation at the Johannesburg High Court, alleging that profit shifting arrangements at one of the largest chrome companies in the world, Samancor, have deprived workers’ trusts of millions of dollars in dividends. The Alternative Information & Development Centre, having assisted with this and previous ground-up cases of profit shifting, believed that there was an opportunity to expand and develop this kind of work with similar organisations concerned with extractivism and economic justice in the Philippines and Brazil - both Global South countries with large, foreign TNC dominated extractives sectors much like South Africa. The Asian Peoples Movement on Debt and Development and Churches and Mining, as experienced organisations with grassroots links, joined the AIDC as project coordinators.