Multinationals Siphon up to $200b in Tax Evasion from Africa, Developing Countries

By Staff Reporter

Tax-Evasion-AfricaSeptember 25, 2019 ( -- Multinational Enterprises (MNEs) take away up to $200 billion a year in tax evasion from developing countries mainly from Africa, UNCTAD 2019 report has revealed.

The new UNCTAD's report launched in Addis Ababa on Wednesday said there are unrestrained private capital flows from developing countries to developed countries and that is negatively affecting developing nations in their journey towards meeting the Sustainable Development Goals.

The report said the situation has forced developing countries to accumulate foreign exchange reserves, usually in the form of short-term dollar dominated bonds, as a self-insurance to prevent a sudden capital –flow reversal and/or to contain is adverse effect.

The UN Economic Commission for Africa (ECA), in March this year in its annual Economic Report on Africa, focused on financing development in Africa, highlighted the urgency to curb what it termed "revenue leaks" through tax evasion and tax avoidance, as well as through misguided government policies. Multinational corporations, corrupt officials, and financial intermediaries around the world siphon off African wealth, leaving national budgets starved for resources to invest in health, education, and sustainable economic growth.

The financing needs across Africa to meet the SDGs are huge, and the financing gap is wide. Estimates of the financing need range from $614 billion to $638 billion a year UNCTAD’s previous report said. Africa's annual financing needs for infrastructure, food security, health, education and climate change mitigation alone are estimated at $210 billion. To narrow the financing gap, African countries need to enhance domestic resource mobilization, and that requires sustained improvement in the efficiency and efficacy of fiscal policy.

As the report shows, for a sample, of 30 developing countries across all income categories, given flagging multilateral support, developing countries would either see their debt-to GDP ratios rise to around 185 percent on average by 2030, or else they would require average annual GDP growth of around 12 percent to meet the investment needs only of the first four SDGs (eliminate poverty, promote nutrition, good health and equality education), the report noted

Africa continues to lose hundreds of millions of dollars to a billion, even a trillion, depending until African countries build a system to share information on tax evasion, as they should, the dream of stemming illicit capital flows will remain just that, ECA said in report early this year.
The report further said a changing climate is already causing severe damage across the world and posing existential threat. Decarbonizing the global economy will require a significant rise in the public investment, especially in clean transport, energy and food system.

The report further said this will need to be supported by effective industrial policies with targeted subsidies, tax incentives, loans and guarantees, as well as accelerated investments in research, development and technology adaptations.

The global economy does not serve all people equally. Under the current configuration of policies, rules, market dynamics and corporate power, economic gaps are likely to increase and environmental degradation intensify the report contends that widening the investment challenge to eradicate poverty and meet nutrition, health and education goals will impose unsustainable financial burdens on many developing countries, requiring deeper reforms to the international trade, financial and monetary system if the 2030 agenda is to be met on time.

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