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Tax experts say a weakness in the definition of illicit financial flows is helping looters make away with money from Africa, weakening its growth.
Now, they want that definition expanded to include tax evasion and other benefits that emanate from transnational crimes, bribery, embezzlement, and other illegal activities.
This broad definition, they argue, would allow for more effective policymaking, fostering international cooperation and enhancing transparency.
“We need to expand the definition because many of the Global North countries right now only consider the illegal activities of the companies to fall under this particular topic,” said Chenai Mukumba, executive director of the Tax Justice Network Africa (TJNA).
“The definition needs to be expanded because there are other activities that businesses are engaging in that are not illegal but have far reaching financial implications on domestic resource mobilisation.” There is no universally accepted definition of illegal financial flows (IFFs), leading to a spectrum of interpretations.
Illicit financial flows involve illegal or illicit financial transfers across borders, such as money laundering, tax abuse, and terrorist financing. They pose a significant threat, especially to developing economies.
IFFs, fuelled by corruption, tax evasion, organised crime, and money laundering, have been often seen as undermining public trust, drain resources from sustainable development, and exacerbate poverty. Such flows lead to revenue losses, particularly in Africa, weakening domestic institutions, decreasing private investments, and escalating inequalities.
International organisations such as the G20, World Bank, IMF, the European Commission and the African Union Commission (AUC) are paying keen attention to IFFs, striving to define, address and mitigate them. Yet the scope has often been limited to illegal activities including tax evasion, which may bring clarity and focus and makes law enforcement possible, but is also criticised for allowing other, broader forms of illicit flows to persist. – The East African
Online Reporter