Logan Wort, the Executive Secretary of African Tax Administration Forum (ATAF) has recently disclosed that the amount outflowing from Africa ranges from $1.2 trillion to $1.4 trillion since 1980 to 2009 due to illegal financial practice, mostly tax evasion and tax avoidance. It is speculated that the illicit outflow of African resources is four times bigger than the continent’s current external debt.
Despite of the criminal diversities such as bribe and money laundering, it is the international trade carried by multinationals to account for the biggest portion of staggering illegal resource flight, accounting for around 60% to 65%. Multinationals did this through various methods, including transfer pricing strategy with over-invoicing or under-pricing trade deals, employing offshore financial and banking centres and tax havens. Facing such aggressive planning, however, tax authorities in some developing countries have very limited capacity to negotiate with the multinationals on their transfer pricing approach and consequence due to the vacuum of domestic regulations and insufficient technical support.
The money leaked is channelled to offshore shell companies in jurisdictions with a highly developed secrecy system, and data on illegal financial flows is described as being “scanty, clouded in a mixed mass of information and scattered in disparate locations.” For administration work in Africa, tax agencies are one of the most reluctant bodies to share data. More stringent rules are expected to tackle this problem. “Seizing these opportunities will be difficult. Squandering them would be unforgivable and indefensible,” said Kofi Annan, the former UN Secretary-General.
Sources: AfricaRenewal, The Nation
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