By Edward Mukaro
ZIMBABWE, like most developing nations in the Southern African Development Committee (SADC) and the globe at large, needs to do more to expose and bring to a halt the shady deals that have eroded the global economy, through the use of ‘shell companies commonly referred to as ‘Anonymous Companies’.
Shell companies are generally used to circumvent high labour jurisdictions, to avoid social contributions and indeed to avoid and evade tax through aggressive planning.
In an exclusive interview with The BusinessConnect, prominent economic and development analyst Dr Davison Todson Gomo said developing countries have felt the brunt of shell companies, as billions of dollars have been siphoned to foreign lands as a result of the malpractice.
Said Dr Gomo, “It is estimated that several thousands of billions of dollars leave the developing countries via shell companies that are located in offshore investment centres throughout the world.
“The shell companies by their nature are untraceable and it makes money laundering and illicit deals and flows impossible to control,” he said.
He added that ‘Globalization’, riding on the back of the Internet and Information Technology has made life easier for businesses and citizens of the world and to a measure has transformed how business is conducted, thereby, driving global economic growth through global business linkages, networking and access to markets both of tangible and intangible goods.
Furthermore, Dr Gomo added that trading onshore or offshore has become a common feature of modern economies and most companies and individuals are continuously looking for room to preserve the value that is created primarily through business operations.
However, he was quick to point out the negative effects brought about by globalisation as corporates and individuals seek to create and preserve the value of profits generated from business operations, however, through, unorthodox means even if it means getting one over the Tax Master.
“Sometimes governments make laws that do not permit the repatriation of profits to the mother country thus defeating the concept of seeking to maximize income growth and placing of returns on investment in jurisdictions that offer protection of investment and much lower Tax regimes.
“As a strategy to overcome these limitations, over the years now, companies and high-value individuals have been using opportunities that are offered by onshore and offshore investment facilities. These facilities operate through the setting up of shell companies whose primary objective is to keep resources far away from the reach of high tax regimes. The system thrives on operating in secrecy by shielding the real owners from the reach of government systems and thus achieving to avoid and evade tax,” said Dr Gomo.
According to Fraud Magazine, shell companies are the financial and deception vehicle of choice for some of the most corrupt, dangerous and ruthless individuals and entities and entities in the world. Arms dealers, drug cartels, corrupt politicians, scammers, terrorists and cybercriminals are just a few of the frequent users of shells.
By Edward Mukaro