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Africa loses close to 90 billion dollars a year to illicit financial flows

15 September 2021, 7:13 PM  |
Sarah Kimani Sarah Kimani |  @SABCNews
Police officers display counterfeit U.S. dollar bills during a news conference in Lima October 14, 2015

Police officers display counterfeit U.S. dollar bills during a news conference in Lima October 14, 2015

Image: Reuters

Police officers display counterfeit U.S. dollar bills during a news conference in Lima October 14, 2015

Africa has lost close to 90 billion dollars a year to illicit financial flows according to the United Nations Conference on Trade and Development (UNCTAD) estimates.

Industry experts attending a two-day webinar on illicit financial flows hosted by Africa Tax Administration Forum (ATAF) and GIZ- say the problem is getting worse.

Lorgan Wort, executive Secretary of ATAF says Africa needs to increase its efforts in tax transparency in the wake of COVID-19 to fight illicit financial flows. Amina Accram reports

Wort says sixty percent of money leaving the continent illegally come from commercial and corporate activities

“Key drivers of these illicit financial outflows in terms of financial institutions, 60 percent of what leaves the continent through these illicit financial outflows come from commercial activities, corporate activities. 35 percent of these come from criminal activity and five percent of this comes from government corruption. Part of the problem of this 60 percent of commercial and corporate activity is that a lot of enablers to this are foreign.”

Wort says Africa loses most of its money largely through multinational enterprise activities, transfer pricing and trade mis-invoicing.

“Poor treaty networks because Africa has three thousand treaties and a lot of those treaties have signed away a lot of their incomes, withholding taxes, giving away income on interest technical services and a range of provisions in those treaties that prevent domestic jurisdiction from collecting the revenue.”

To fight illicit financial flows the ATAF says Africa needs to strengthen its exchange of information on tax as countries do not benefit from country-by-country reports.

It also believes strengthening of transfer pricing legislation can reduce the illicit outflows of money from the continent

“This is the ability of multi-national companies to do business with its related company and through that deprive the fiscus huge amount of income when they abuse transfer pricing legislation. Transfer pricing is not illegal it’s the abuse thereof. We do have the ability to tighten trade and trade pricing and changing the policy. A lot of what we lose through commercial activity is the absence of laws, absence of policies and the absence of automation and digital frameworks within tax administration.”

Tax expert Rudolph Terblanche says African tax administrators can enhance their relationship with other tax regulatory authorities to stop money leaving illegally out of the continent.

“Other regulatory authorities, for instance, financial intelligence sector or financial intelligence agencies central banks, other financial institutions and to ensure that all this information is presented in an electronic format and being used during data mining processes and risk identification processes to identify instance’s of illicit financial flows.”

Industry experts emphasised that Africa’s illicit financial flows cannot be eradicated without international cooperation with other actors and stakeholders such as the OECD, the UN, Global Forum, AU, amongst others.

ATAF says it remains committed to the global efforts to eradicate illicit financial flows

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