Thursday, March 22, 2012

VOA News: Africa: Tax Evasion Possibly Biggest Drain of Money From Africa

VOA News: Africa
Africa Voice of America
Tax Evasion Possibly Biggest Drain of Money From Africa
Mar 22nd 2012, 23:59

According to Global Financial Integrity (GFI), a Washington based group, the amount of money that has illegally left Africa since 1979 is twice as much as the amount that came in as aid money.

Raymond Baker, director of GFI, said a common misconception is that money illegally flowing out of the continent is the result of corruption. But he said corruption is actually a distant third to commercial tax evasion.

"Globally we have made an estimate that in the cross-border flow of illicit money, the component that stems from bribery and theft by government officials is only about three percent of the global total," said Baker.

While that figure is a global figure, Baker said he is confident that tax evasion is the number one source of illicit money flow from Africa, followed by criminal activity such as drug trafficking and corruption comes in at a distant third.

Baker explained that one of the most common forms of tax evasion comes through cheating of customs and value added taxes on goods flowing in and out of countries.

"Most of the commercial tax evasion is done through the mispricing of trade - overpricing imports and underpricing exports."

According to GFI, Nigeria has experienced the biggest amount of illicit outflow, with nearly $90 billion leaving the country illegally since 1979.

Baker suggested using technology to stem this problem.

"There is a growing availability of world market pricing data that is accessible online, so that customs and port officials in developing countries, holding an iPad would be able to look at an invoice or look at incoming or outgoing cargo and very quickly be able to check what is a similar price on this kind of commodity."

He added his group and governments from emerging economies such as South Africa are meeting next week in London for a Trade Mispricing Roundtable.

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