Africa loses around $100 billion annually, or around four per cent of the continent’s GDP as a result of illicit financial flows.
The latest estimates from Economic Community of Africa (ECA) put Africa’s net financial losses through trade mis-invoicing alone at an average of US$73 billion over the period 2000 to 2015; at the same time, Global Financial Integrity estimates annual losses of around $27 billion through other channels.
A recent report of the Africa Tax Administration Forum (ATAF) and ECA at the just concluded 51st Session of the ECA and the Conference of Ministers of Finance noted that “these estimates leave out a number of channels through which illicit financial flows can leave the continent; as such, the total figure could be even higher.”
At the conference, “ATAF expressed the need to address trade mis-invoicing and abusive transfer pricing by some multi-national corporations through technical assistance and country cooperation at a continental level.”
A call was also made by Akingbolahan Adeniran, Rule of Law Advisor to the Vice President Yemi Osinbajo of Nigeria, to “amplify advocacy” for the return of illicit financial assets from developed countries to source countries on the African continent.
It was agreed at the conference that tackling illicit financial flows will be an important part of mobilising additional domestic financial resources for development in the continent.
The report noted that “when the report of the High Level Panel on illicit financial flows was released, the African Union Heads of State and Government adopted its recommendations in full. Since then, a number of African countries have taken steps to tackle such flows, including through introducing the open contracting data standard, taking steps towards introducing beneficial ownership registers and making use of the exchange of tax information to increase tax revenues.”
However the report lamented that many of the panel’s recommendations have not been implemented by most African countries. In addition, the Panel highlighted that tackling illicit financial flows in Africa was a problem that required a global solution, not only actions by African countries themselves.
With efforts on international tax cooperation being led by the OECD, current international efforts to tackle illicit financial flows are not always adapted to addressing the priorities for African countries.
As a result of this development, the role of ATAF, is increasingly becoming important in the development and shaping of tax policy in the continent.
ATAF, as an African voice on tax issues to inform and influence the global dialogue, has recently achieved revised legislation on transfer pricing in many countries where these legislation have come into law.
Also, “ATAF has played an important role in revenue mobilisation through technical assistance programmes that have identified revenue gaps and have returned money to countries to the tune of over $150 million” the report said.
The continent’s leading tax administration ATAF, has ramped up efforts in ensuring African priorities are recognised at a global level in achieving the following: recognizing its work at global standard-setting bodies during the revision on pricing of commodities, intra-group services and many other issues; cementing its role as promoter and implementer of exchange of information (EOI); and establishing a standard in collecting tax indicators and data for 32 African countries which assist tax revenue planning and forecasting and hence policy formulation.
Mr Olav Lundestol (Norad) set out the challenges for policy makers to establish a domestic environment that encourage domestic and foreign direct investment.
Prof. Annet Oguttu (UNISA) spoke to the issues of base erosion and profit shifting (BEPS) in Africa and the value of ATAF tools in addressing BEPS. She said, “all boils down to political will, and many African countries have been dragging their feet.”
Going forward, ATAF has called for “the establishment of a continental Tax Body under the auspices of the Africa Union Commission (AUC) where African tax related standards in policy, legislation and administration can be discussed and activities reported to and adopted and formally to acknowledge ATAF as the African Union’s Specialized Agency to institutionalise inter-country and regional tax cooperation and develop African Tax Standards that protect our tax base, maximise domestic resource mobilisation on the continent while promoting foreign direct investment.”
