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 big
companies are swindling the government out of at least $248 million a year.
The East African nation topped the worst of a list of
nations across the continent examined by a watchdog group, Global Financial
Integrity (GFI), with nearly $19 billion in illicit flows over the past decade,
the equivalent to over seven per cent 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 mis-invoicing reveals stark figures.
Mis-invoicing 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 mis-invoicing is a $424-billion-a-year
problem, and makes up about 80 per cent 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 mis-invoicing is different. It involves tangible goods
that are shipped across borders, and the activity is, therefore, a lot easier
to spot.‘Critical’ resources lostThe researchers simply looked at the value of goods sent to
or received from developed countries -where customs officials tend to be more
rigorous - and compared it to the values declared in developing countries. In
Tanzania, the report discovered that, rather than undervaluing imports,
corporations were overvaluing them.
In the case of fuel imports, overvaluing allows companies
exempt from paying fuel taxes - such as mining companies - to reduce on paper
the profits they will be taxed on, with GFI calculating as much as $248 million
a year in revenue was lost.
In total, at least $8 billion was illegally drained out of
the Tanzanian economy over just 10 years, said LeBlanc. “These critical
resources could have helped to create more jobs, to fund greater access to
social services to improve the lives of average Tanzanians, and to improve
infrastructure that is vital to additional economic development,” he said.
But it wasn’t all money going out. The report identified
nearly 11 billion in export over-invoicing, which may be a sign of
money-laundering and payments for illicit goods.
Dar es Salaam Port is a major hub for illegal export of
wildlife products like rhino horn and ivory, as well as drugs and gold.
Stronger and more specific laws can help tackle the problem, the report added.
They also suggest that customs officials have access to
up-to-date pricing data, to allow them to flag questionable exports and
imports. “Every international organization in the world
is basically telling them promote exports and trade facilitation, and then we
come along and say that perhaps these things have unintended consequences that
need to be addressed,” said LeBlanc.
“For years and years this problem has been known by the
World Bank and IMF, but it’s been viewed as an intrinsic problem with the
African countries, not looking at the other side of the equation - the overall
financial system, which is a system largely created by Western nations,” he
added. “It’s a much larger, more intricate problem.” (AFP)
Source: THE CITIZEN Posted Sunday, June 8
2014 at 15:26
What a shame
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