Africa loses nearly US$89bn a year in illicit financial flows such as tax evasion and under-reporting of export revenue, a United Nations study has showed.
The 248-page report, the most comprehensive to date about Africa by the United Nations Conference on Trade and Development (UNCTAD), calls Africa a ‘net creditor to the world’. It shows an increasing trend over time and is higher than most previous estimates. The figure is also higher than what the continent receives in Official development assistance.
“Illicit financial flows rob Africa and its people of their prospects, undermining transparency and accountability and eroding trust in African institutions,” said UNCTAD Secretary-General Mukhisa Kituyi.
Nearly half of the total annual figure of $89bn is accounted for by the export of commodities such as gold, diamonds and platinum, the report, released on Monday (28 September), said. For example, gold accounted for 77 percent of the total under-invoiced exports worth $40bn in 2015, it showed.
Multinational companies under declare the value of exports, cheating on payments of taxes and royalties, depriving developing countries of foreign exchange and eroding their tax revenue, UNCTAD said.
Economists have long argued that despite being aid dependent, Africa is actually a net exporter of capital due to tax dodging and people hiding cash in tax havens.
Activists say countries should introduce tough regulations on multinational companies and profit repatriation.