Take steps to deal with illicit financial flows - ISODEC tells govt
The Integrated Social Development Centre (ISODEC) has called on the government to take pragmatic measures to deal with illicit financial flows (IFFs) usually carried out by multinational companies and individuals against developing countries.
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It said the government of Ghana could only do that by taking immediate steps to plug the loopholes in the system to check such activities in order to enhance the development of the country.
IFFs are illegal movements of money or capital from one country to another. Activities such as profit shifting, manipulation of production, under-invoicing, over-invoicing and tax havens all form part of the practice.
The Campaign Coordinator of ISODEC, Dr Steve Manteaw, made the call at this year’s ISODEC press soiree in Accra.
The annual event brought together journalists and executives of ISODEC to discuss some key national issues, especially in the oil and gas sectors.
Losses through IFFs
According to ISODEC, Ghana loses a staggering $5.5 billion annually through IFF activities such as trade leakages.
Africa also loses an estimated $50 billion through IFFs annually, more than the $41.3 billion which comes to the continent as donor aids.
According to a recent Tax Justice Network (TJN) report, global loses through IFFs stands at $500 billion annually.
Exporters use under-invoicing to dodge taxes and bring less foreign exchange into the country, leaving the rest of their earnings in offshore accounts.
On the other hand, over-invoicing of exported goods is used to abuse export subsidies. Importers also use under-invoicing to evade tariffs and over-invoicing to get extra foreign currency from higher prices.
“The main conduits for these losses are trade mis-invoicing, corruption, and profit shifting in projects and trade deals where companies move profits from their subsidiaries in higher tax countries’ where the real economic activity takes place, to other subsidiaries in tax havens.
“If we are able to address this as a nation, we can fund the free senior high school (SHS) policy introduced recently consistently,” he said.
ISODEC study on IFFs
Presenting highlights of a study undertaken by ISODEC on the issue of trade mis-pricing in Ghana, Dr Manteaw said the study found that the country’s exports to the European Union (EU) was undervalued by an estimated €2.7 billion during a 13-year period between 2000 and 2012; being 14 per cent of the total value of exports to the EU.
The analysis, which used data from EUROSTAT for trade with the EU, also found that Ghana’s import from the EU within the period was overvalued at €2.8 billion; 14 per cent of the total import from the EU.
Dr Manteaw called for active participation and coordination from citizens to fight IFFs, noting that the government could not do it alone.
An Executive Member of ISODEC, Mr Bernard Anaba, also called for institutional collaboration to tackle issues involving IFFs.