Commercial Tax Evasion Robs African Economies

Posted March 23rd, 2012 at 3:45 am (UTC-5)
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A U.S.-based advocacy group says the amount of money that has left Africa illegally since 1979 is twice the amount that has come in from aid.

Global Financial Integrity director Raymond Baker told VOA his group believes most of the illegal funds are the result of tax evasion — not bribes and embezzlement.

“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.”

The group has not analyzed African outflows separately, but he says he is confident the global ranking holds true there too: tax evasion first, criminal activity, like drug trafficking, second, and government corruption in third place.

Baker explains a common way to avoid customs duties and other taxes related to international trade is by lying about how much the goods cost.

“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 largest illicit outflow, with nearly $90 billion leaving the country illegally since 1979.

Baker says one important way to fight the practice is by making pricing data accessible online, so that customs officials can know whether the invoice provided in the shipment is accurate.