Illicit Financial Flows and Tax Justice
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Inequality and tax evasion are growing both
within and between countries, while the rich on all continents funnel
their wealth into secret bank accounts scattered around the world.
This erodes the public sector, starves countries of funds needed
for development, and drives up deficits.
The trend is worldwide as multinational companies shuttle money and
subsidiaries between countries to minimize taxes, while the ultra-rich and organized crime hide their assets in untraceable shell accounts. But the toll in Africa is enormous, with losses estimated at $50 billion to $80 billion a year due to illicit capital flight.
One recent study, for example, estimated at least US$60.8 billion in losses due to transfer pricing in or out of 5 African Countries (Ghana, Kenya, Mozambique, Tanzania, and Uganda), from 2002-2011.
The good news is that governments and multilateral agencies around
the world are waking up to this issue, and the pressure for transparency
in financial reporting is growing. The same technical mechanisms that
have been used to track funds of drug traffickers and terrorist networks can now be used, if there is political will, to track
monies lost to illicit financial flows and tax evasion.
The Stop the Bleeding Africa Campaign led by six continent-wide
African civil society networks is seeking support from African and
global organizations as it continues to lobby African and other
governments to stop illegal and illegitimate financial flows that
are draining resources for the continent.
Sign up to the Campaign and find more background on the websites of the
Campaign and of
Tax Justice Network - Africa.
USAN: Top Ten Questions on IFF and Africa |
Resources on IFF and Africa |
Top Ten Books on IFF and Tax Evasion |
National and Global Inequality
Most recent bulletins on illicit financial flows and tax justice
January 8, 2019 Mozambique/Global: Who Pays for Transnational Corruption?
The line-up of those involved in this $2.2 billion fraudulent loan deal, now
implicated in a case in the U.S. District Court of the Eastern District of New York,
is multinational. The five named individuals indicted include the former Minister of
Finance of Mozambique, a Lebanese businessman representing Privinvest (an
international shipping conglomerate in Abu Dhabi), and three London-based bankers,
citizens of New Zealand, Great Britain, and Bulgaria, employed at the time of the
loans by the giant Swiss bank Credit Suisse. Three more names are redacted in the
indictment and 5 others, three Mozambicans and two additional employees of
Privinvest, are cited but not named in the text of the indictment.
November 12, 2018 Africa: Why Mining is Hard to Tax
"In Africa as elsewhere in the world, while energy companies might be somewhat undertaxed,
mining companies typically are greatly under-taxed. Indeed, it is only a
slight exaggeration to say that, with a few significant exceptions, notably
Botswana’s diamond mines, mining in Africa is barely taxed at all. One reliable
source indicates that contemporary African governments collect about 55% of the total
value of energy production in tax revenue, but only 3% of the value of mining
production." - Taxing Africa
November 12, 2018 Africa: Africa Mining Vision
The Africa Mining Vision (AMV) was adopted by Heads of State at the February 2009
African Union summit following the October 2008 meeting of African Ministers
responsible for Mineral Resources Development. An action plan was adopted in December
2011, and the African Minerals Development Centre (https://www.uneca.org/amdc)
launched in December 2013. The lead role in developing the vision was taken by
African professional staff at the United Nations Economic Commission for Africa
(UNECA), in consultation not only with African governments but also with civil
society organizations and specialists on the mining sector.
October 16, 2018 Africa/Global: Drug Company Profits vs. Public Health
"Oxfam examined publicly available data on subsidiaries of four of the largest US
drug companies and found a striking pattern. In the countries analyzed that have
standard corporate tax rates, rich or poor, the corporations’ pretax profits were
low. In eight advanced economies, drug company profits averaged 7 percent, while in
seven developing countries they averaged 5 percent. Yet globally, these corporations
reported annual global profits of up to 30 percent. So where were the high profits?
Tax havens. In four countries that charge low or no corporate tax rates, these
companies posted skyrocketing 31 percent profit margins." - Oxfam, September 2018
October 1, 2018 Africa/Global: Professionals Enabling Corruption
"Lifting the veil of corporate secrecy reveals a simple principle: Offshore is
actually a set of professional services that specialize in enabling businesses and
individuals to effectively retreat from legal, regulatory, and public scrutiny,
empowering them vis-a-vis those who have remained 'onshore' without access to such
services." - Hudson Institute
June 4, 2018 West Africa/Global: Tax Evasion without Borders
"On paper, the company that engineered and built the [$50 million mineral sands]
processing plant [in Senegal] was SNC Lavalin-Mauritius Ltd, a local division of SNC
Lavalin [Canada]. In reality, SNC Lavalin-Mauritius wasn’t involved. It was a shell,
created for the specific purpose of helping the engineering giant avoid tax payments.
The company had no construction equipment and no office of its own. It operated from
inside the Mauritius office of the offshoring law firm Appleby, which helped SNCLavalin
create the shell company." - West Africa Leaks
March 12, 2018 Africa/Global: Charting Where They Hide the Money, 2
"Overall, the City of London and [its] offshore satellites constitute by
far the most important part of the global offshore world of secrecy
jurisdictions. Had we lumped them together, the British network would
be at the top of our index, above Switzerland." - Tax Justice Network
March 12, 2018 Africa/Global: Charting Where They Hide the Money, 1
"Switzerland, the United States and the Cayman Islands are the world’s biggest
contributors to financial secrecy, according to the latest edition of the Tax Justice
Network’s Financial Secrecy Index (FSI). ... Kenya, which this year set up its own
tax haven in the form of the Nairobi International Financial Centre, is an example of
how interests of western financial service lobbyists have successfully lured
governments into a race to the bottom. Kenya, which has been assessed for the first
time in the 2018 FSI, has an extremely high secrecy score of 80/100." - Tax Justice
January 15, 2018 Africa/Global: World Trends in Inequality
"The divergence in inequality levels has been particularly extreme between Western
Europe and the United States, which had similar levels of inequality in 1980 but
today are in radically different situations. While the top 1% income share was close
to 10% in both regions in 1980, it rose only slightly to 12% in 2016 in Western
Europe while it shot up to 20% in the United States. Meanwhile, in the United States,
the bottom 50% income share decreased from more than 20% in 1980 to 13% in 2016." -
World Inequality Report, 2018
January 15, 2018 South Africa/USA: Inequality is Extreme and Still Rising
"I came here because of my deep interest and affection for a land settled by the
Dutch in the mid-seventeenth century, then taken over by the British, and at last
independent; a land in which the native inhabitants were at first subdued, but
relations with whom remain a problem to this day; a land which defined itself on a
hostile frontier; a land which has tamed rich natural resources through the energetic
application of modern technology; a land which once imported slaves, and now must
struggle to wipe out the last traces of that former bondage. I refer, of course, to
the United States of America." - Robert F. Kennedy, University of Cape Town, June 6,
December 11, 2017 Africa/Global: Paradise Papers, Plus
The Paradise Papers investigation, based on a leak of 6.8 million documents from the
offshore law firm Appleby, is the largest of recent revelations of the hidden world
of financial manipulation used by both multinational corporations and rich (high net
worth) individuals from around the world. Like the Panama Papers investigation that
won the 2017 Pulitzer Prize, it is based both on "big data" analysis and on
collaborative investigative reporting by teams of hundreds of journalists. But it is
based on the records of only one offshore law firm, albeit one of the most prominent.
Despite the size of the leak, it still reveals only the tip of the iceberg.
September 25, 2017 Africa/Global: How Women Lose from Tax Injustice
A new report from the Association for Women in Development (AWID), authored by Dr.
Attiya Waris in Nairobi, makes a powerful case that women lose disproportionately
from illicit financial flows, which reduce the tax base and deprive states of the
resources to invest in critical public goods, and that addressing this issue is key
to efforts to combat gender inequality. The point should not be surprising, but too
often the impact of tax evasion and tax avoidance is cloaked in jargon that makes it
less visible than cases such as overt discrimination against women in employment and
wages. In contrast, this report stands out for its clarity. AfricaFocus strongly
recommends the full version, which is available on-line at