Tanzania's poor are suffering from the theft of trade taxes
By Chris Oke, AFP
June 2, 2014, 12:01 am TWN
DAR ES SALAAM, Tanzania--Tanzania's mining revenues are touted as a key way to reduce reliance on foreign aid and pull people out of poverty, but experts argue companies are swindling the government out of at least US$248 million a year.
The East African nation topped the worst of a list of nations across the continent examined by the watchdog group Global Financial Integrity (GFI), with nearly US$19 billion in illicit flows over the past decade, the equivalent to over seven percent of the country's total government revenue.
“There's a narrative in the development community that there's something wrong with developing countries, because we keep pumping money in, and they're not developing as quickly as we'd like them to,” said GFI economist Brian LeBlanc.
“The reality is that we're draining money out, and we're doing it at an increasing rate.”
The Washington-based GFI's examination of trade misinvoicing reveals stark figures.
Misinvoicing occurs when businesses deliberately lie about the value of the goods they're importing or exporting. There are a lot of illegal reasons to do this, including tax evasion and money laundering.
Globally, trade misinvoicing is a US$424 billion a year problem, and makes up about 80 percent of all the money that flows out of developing countries illegally, GFI said.
Numbers like this, when compared to aid, mean there's far more money draining out of Africa than going in.
Much attention has been given to transfer pricing, when multinational companies employ accounting tricks to shift profits into countries where they'll pay less tax.
Trade misinvoicing is different. It involves tangible goods that are shipped across borders, and the activity is therefore a lot easier to spot.
'Critical' Resources Lost