The International Monetary Fund (IMF) and the World Bank has been urged to do more in the fight against Illicit Financial Flows (IFFs) around the World, especially from Africa.
Tax Justice Network Africa, (TJNA) said that the two World financial body could step up their games to stop the financial bleeding of Africa rather than turn a blind eye.
The Deputy Executive Director, TJNA, Mr Jason Braganza in an interview with the News Agency of Nigeria, called on the two World Bodies to use their influence in the campaign against financial secrecy and harmful tax practices by multinational corporations.
“The big step that we are looking for from the IMF and World Bank first of all, is in defining what illicit financial flows constitute.
“It is important that there is a proper state capture of taxation from multinational corporations and high network individuals and at the same time, minimising the risk of harmful tax practices and aggressive tax avoidance.
“So this is the starting point and particularly for the IMF, who play a policing role of the global economy, for them to come on board into the IFFs conversation.
“This is very important and it will take a lot of political advocacy, political negotiating to get the Fund to change its position and adopt this new one.
Braganza said that the development agencies should further promote the principles of good governance in tax and finance, including transparency, fair tax competition, accountability to achieve financing for development.
“International tax cooperation and coordination ought to be in the interest of developing countries and poor countries across the world.
“It is in their interest that international tax cooperation resides with a global tax commission that sits within the United Nations,” he said.
It is widely acknowledged that financing development opportunities in Africa has proven to be complex and difficult on account of numerous factors.
This cycle of economic and financing uncertainty has positioned African host countries at a strong disadvantage.
A major barrier to achieving this along with social, economic and political progress at many levels, is the prevalence of IFFs.
IFFs flowing out of Africa have become a major source of concern, given the scale and negative impact such IFFs have on Africa’s development and governance objectives.
Be it in form of tax evasion, tax underpayment or wrong trade invoicing, Africa is estimated to be losing over $50 billion annually.
Even though it is difficult to acquire accurate data on and ascertain the exact magnitude of all financial transactions in Africa, it is estimated that illicit financial outflows from Africa should be in the region between 50 to 60 billion dollars per annum.
This equates to one trillion dollars in illicit flows over the last 50 years.
The amount total is said to be the equivalent of, if not higher than, all development assistance received by Africa over the same period of time, according to US-based research body Global Financial Integrity (GFI).
Illicit financial flows from developing countries are facilitated and perpetuated primarily by opacity in the global financial system.
This endemic issue is reflected in many well-known ways, such as the existence of tax havens and secrecy jurisdictions, anonymous companies and other legal entities, and innumerable techniques available to launder dirty money.
An example of such ways is through mis-invoicing trade transactions, often called trade-based money laundering.
Many international bodies such as the United Nations Economic Commission for Africa and civil society groups have over the years made recommendations to addressing this menace.
This includes a call for global movement toward the automatic exchange of financial information, as a means of detecting and deterring abusive tax avoidance practices.
Also, Country-by-Country Reporting has been advocated, which would require multinational corporations to publicly disclose their revenues, profits, losses, sales, taxes paid, subsidiaries, and staff levels on a country-by-country basis.
Furthermore, Trade transactions involving tax haven jurisdictions should be treated with the highest level of scrutiny by customs, tax, and law enforcement officials, given the greater potential for abuse.
Likewise, there has been calls to curb trade misinvoicing, which must be a major focus for policymakers around the world.