Last updated: 05/21/2011

http://nigerianobservernews.com/21052011/weekendobserver/news/7.html

THE African Forum on Financing for Development yesterday urged the countries in the continent to address illicit capital flows and money laundering.

It also urged them to control porous tax systems, capital flight and corruption in order to accelerate the transformation of their economies

The forum made the call at its meeting in Addis Ababa on “Tackling Illicit Capital Flows for Economic Transformation’’

The forum said the time had come for governments and development partners to take collective action against the identified economic problems.

In his contribution Mr. Kenneth Adeyemi of the Nigerian Economic Society, said corruption, tax evasion and outright stealing of public funds had inflicted untold damage to the economies of Africa.

He blamed the situation on the lack of transparency in the international banking system.

“Lack of transparency in the international banking system has helped countries provide safe havens for such dirty monies to grow substantially in their banking operations and strategies, both in terms of lending and deposit taking and mobilisation’’, Adeyemi said.

He said IMF statistics showed that the continent witnessed a global off-shore bank lending increase from 39 billion dollars in 1985 to 88 billion dollars between 1985 and 1986.

He noted that offshore bank deposits increased by 135 per cent from 54 billion dollars to 127 billion dollars in the same period.

 “Total illicit financial outflow from Africa was conservatively put at 854 billion dollars with Nigeria topping the list of top five countries.

 “Nigeria has 89.5 billion dollars , followed by Egypt with 70.5 billion dollars, Algeria is third with 25.7 billion dollars, followed by Morocco with 25 billion dollars and South Africa 24.9 billion dollars,’’ Adeyemi said.

Also contributing Mr Dereje Alemayehu, Chairman of the African Tax Justice Network, described as alarming and dangerous the high rate of tax leakages not only in Africa but in most developing countries.

“Poor countries are deprived of badly needed tax revenues. Our estimate showed that the annual loss of tax revenue is about 160 billion. This is much higher than the money required for the MDGs,’’ Alemayehu said.

He identified falsified invoicing, inflating, undervaluing of prices to increase cost, diminishing tax liability, round-tripping, by which businesses operating in a country send their money offshore, as some of the avenues used for tax evasion.

He said business operators bring back the money under the disguise of foreign investment to get preferential tax treatment.