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Illicit Financial Flows and Tax Justice

This page updated on-line at http://www.africafocus.org/intro-iff.php.

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Talking Points

  • 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

June 4, 2018  West Africa/Global: Tax Evasion without Borders http://www.africafocus.org/docs18/wa1806.php
    "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, 1 http://www.africafocus.org/docs18/fsi1803a.php
    "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 Network

March 12, 2018  Africa/Global: Charting Where They Hide the Money, 2 http://www.africafocus.org/docs18/fsi1803b.php
    "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

January 15, 2018  Africa/Global: World Trends in Inequality http://www.africafocus.org/docs18/ineq1801.php
    "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 http://www.africafocus.org/docs18/sa-us1801.php
    "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, 1966

December 11, 2017  Africa/Global: Paradise Papers, Plus http://www.africafocus.org/docs17/iff1712.php
    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 http://www.africafocus.org/docs17/iff1709.php
    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 http://tinyurl.com/ych3zce3

July 17, 2017  Congo (Kinshasa): Inga Dam Mirage Recedes, Again http://www.africafocus.org/docs17/inga1707.php
    The latest projections for the Inga 3 hydroelectric project on the Congo River to become operational, cited in press reports last week, are 2024 or 2025. But even if the project is financed and constructed, says a new report, the project will likely provide only minimal electric power for the people of Democratic Republic of the Congo and burden the country with more unsustainable debt.

July 10, 2017  Africa/Global: Following the Money http://www.africafocus.org/docs17/iff1707.php
    "As an important tool in our fight against corruption, tax evasion, terrorist financing and money laundering, we will advance the effective implementation of the international standards on transparency and beneficial ownership of legal persons and legal arrangements, including the availability of information in the domestic and crossborder context." - G20 Summit Communiqué, Hamburg, July 8, 2017

June 6, 2017  South Africa: #Guptaleaks - Will Heads Roll? http://www.africafocus.org/docs17/saf1706.php
    "The Guptas have until now escaped investigation from the state agencies because they have purchased indemnity. You have to hand it to the Guptas; the way they went about capturing the state is quite impressive. Not only did they buy the president and his son, they targeted key people in government that could act as their minions. When people were resistant to their agenda, they scouted for bootlickers and had them appointed. They paid off people in the security agencies to make sure they would not be bothered with criminal investigations." - Daily Maverick, June 5, 2017

May 24, 2017  Nigeria: Corruption Undercuts Boko Haram Fight http://www.africafocus.org/docs17/nig1705.php
    "Nigeria's corrupt elites have profited from conflict; with oil prices at a record low, defence has provided new and lucrative opportunities for the country's corrupt kleptocrats. Former military chiefs have stolen as much as US $15 billion – a sum equivalent to half of Nigeria's foreign currency reserves – through fraudulent arms procurement deals." - new report on "Weaponizing Tranparency"

April 17, 2017  Africa/Global: New Reports Show Massive Tax Losses http://www.africafocus.org/docs17/tax1704.php
    On April 15, "tax day" in the United States, tens of thousands of demonstrators in over 200 communities around the country marched to demand that President Trump make public his tax returns ( http://taxmarch.org/home/). Protesters also denounced his use of taxpayer funds for his personal profit and military escalation while his administration continues its assault on spending for urgent public needs at home and around the world. There is no sign that the President will comply with the demand for transparency. But the award of a Pulitzer Prize last week to the international consortium that exposed the Panama Papers was only one indicator that the drive to expose tax evasion, tax avoidance, and corruption around the world will continue.

Complete listing of bulletins on illicit financial flows, tax justice, and debt, 2003-present