Illicit financial flows schemes (IFFs such as tax evasions and money laundering continue to damage public finances and governance of countries more so in Africa.
The situation has not been any better and concerns are, with attention fully on combating the CoronaVirus pandemic, governments and financial regulators will be less focused in tracking the movement of IFFs.
Illicit cross-border financial flows have been estimated at $1 to $1.6 trillion per year, dwarfing the $135 billion per year or so in global foreign aid. According to the previous report by TJN, African countries alone have lost over $1 trillion (Sh100 trillion) capital flight, while combined external debts less than $200 billion.
Among industry players and civil society groups a key challenge to tackling illicit financial flows is the difficulty countries face in identifying which financial flows carry the largest risk to their economies.
In calling for concerted efforts in ensuring this is fix, the Nairobi-based Tax Justice Network Africa says weak legislative frameworks and regulations drafted in the early 1960’s and 70’s, may have lost relevance in today’s economic ecosystem.
In a bid to attract local and foreign private sector investments, African countries enable tax evasion hence an overhaul is needed especially on tax incentives.
In Africa, commercial illicit financial outflows are the largest followed by criminal flows and outright bribery, according to the High-level Panel Report on IFFs.
The HLP report estimates $50 billion is taken away from Africa due to trade mispricing.
Hence, TJNA advocates, should this loopholes be addressed in many African legislative frameworks, it could reduce the overall IFF outflows from the continent and raise resources to finance development.