Report fingers big corporates as key beneficiaries of pandemic cash
By Steve Umidha
Kenya’s biggest corporations massively profited from the pandemic funding at the expense of small firms which were left exposed when Covid-19 hit, a new report has shown.
The report, Towards a People’s Recovery: Tracking Fiscal and Social Protection Responses to COVID-19 in the Global South, found that 63 per cent of foreign funding from the World Bank and International Monetary Fund (IMF) among other donors went to big businesses – who could have had a lot of cash on-hand to shield workers, adjust small firms’ business models and prevent costly public bail-outs.
Authored by the Financial Transparency Coalition (FTC) and its partners, the survey analyzed data from nine countries Kenya, South Africa, Sierra Leone, Bangladesh, India, Nepal, Honduras, Guatemala, and El Salvador, also found that just a quarter of the funds went to social protection.
In Kenya for instance, the survey found that 92 per cent of Covid-19-related bailout funds went to big corporations rather than to those facing poverty despite the country’s corporate tax rate being the lowest in East Africa.
“Most countries in the Global South were able to determine where to direct their public Covid-19 bailout funds. There are a whole host of reasons, however, why they did not direct resources to social services, and these ranged from the inadequate capacity of governments to identify vulnerable populations in their respective countries to lobbying by the private sector for policy change in their favor,” said Chenai Mukumba, Policy Research and Advocacy Manager at Tax Justice Network Africa (TJNA
The FTC’s new report also warns about a lack of transparency of the recovery funds.
The World Bank provided Kenya with $50 million in immediate funding to support the country’s emergency response with most of the funding now unaccounted for.
Last month for instance, hundreds of thousands of Kenyans signed an online petition opposing the disbursement of $307.5 million (Sh33.5 billion) by the IMF to be used for budget support.
Through global lobby website, Change.org, the petitioners had demanded that the IMF Executive Board cancel the loan because of alleged corruption involving previous disbursements.
“This opacity is partly due to most international monitoring systems looking at initial funding announcements rather than tracking the actual disbursement of funds,” reads the report in part.
To address the dangerous imbalance in existing Covid-19 relief funds, the FTC recommends a minimum corporate tax rate of at least 25 per cent, in line with the proposal from the United Nations Financial Accountability, Transparency and Integrity (FACTI).
States may also adopt or raise taxes on the wealthy and corporations to ensure those who can afford to pay would shoulder the lion share of the cost. It is essential to implement public beneficial ownership registries to know who benefits from recovery spending and profits made during the pandemic.
The findings come in the wake of the anticipated forum on Covid-19 Bailout Tracker including the specific tax measures for the private sector, for social protection as well as the role of IMF and the World Bank at FTC’s upcoming high-level panel on April 27.
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