New GFI Report Looks at Illicit Flows in East Africa, But How Are They Linked to Development?

May 15th, 2014

GFIGlobal Financial Integrity (GFI), a Washington-based NGO and Coordinating Committee member of the FTC, has released a new report highlighting the drain that illicit financial flows have on countries in the developing world. But rather than look at the entire developing world, the report focused on five specific countries in east Africa: Uganda, Ghana, Mozambique, Kenya, and Tanzania.

The report investigates trade mis-invoicing—the act of under- or over-valuing goods so that a business can move money into our out of a country undetected—and estimates how much tax revenue these five countries are potentially losing. The results are staggering.

Today, Raymond Baker, President of GFI, penned an opinion piece on the international development website Devex to explain how these illicit flows affect development.  Too often, some see the issues of illicit flows and financing of development to be separate topics, but in fact, they are inherently linked.

From the article:

. . .the report suggests that the loss to taxpayers may have amounted to a massive 12.7 percent of Uganda’s entire government revenue over the period, followed by Ghana (11 percent), Mozambique (10.4 percent), Kenya (8.3 percent) and Tanzania (7.4 percent).

These numbers should alarm policymakers worldwide.

The potential revenue drain from trade misinvoicing means that Ghana has less money to spend on healthcare, Kenya has less money to devote to education, and Mozambique has less money to invest in infrastructure.  Trade misinvoicing is perhaps the most serious economic issue plaguing these countries.

As we prepare to transition into the post-2015 development agenda, illicit financial flows and, specifically, trade misinvoicing must be top priorities for policy makers and researchers.

You can read the article in its entirety here.

Written by Christian Freymeyer

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