African Countries Lose Billions through Misinvoiced Trade

Fraudulent Trade Transactions Channeled at Least US$60.8 Billion Illegally in or out of 5 African Countries from 2002-2011. This is according to a report published on Monday by Global Financial Integrity (GFI), a Washington DC-based research and advocacy organization.

Tax Loss from Trade Misinvoicing Potentially at 12.7% of Uganda’s Total Government Revenue, followed by Ghana (11.0%), Mozambique (10.4%), Kenya (8.3%), & Tanzania (7.4%).

The fraudulent misinvoicing of trade is hampering economic growth and potentially resulting in billions of U.S. dollars in lost tax revenue in Ghana, Kenya, Mozambique, Tanzania, and Uganda, according to a new report.

The study—funded by the Ministry of Foreign Affairs of Denmark—finds that the over- and under-invoicing of trade transactions facilitated at least US$60.8 billion in illicit financial flows into or out of the five African countries between 2002 and 2011.

According to the report, US$3.94 billion flowed illegally into the country due to trade misinvoicing, US$13.58 billion in illicit capital flowed either into or out of the country due to trade misinvoicing.

Gross illicit flows were pegged at 7.8 percent of the country's GDP. The under-invoicing of exports amounted to US$9.26 billion, the under-invoicing of exports was the primary method for shifting money illicitly out of the country while the under-invoicing of imports amounted to US$3.94 billion.

Trade misinvoicing is stymieing economic growth and likely decimating government revenues in the five countries, said GFI President Raymond Baker, a longtime authority on financial crime.

"The consequences are simply devastating. The capital drained from trade misinvoicing means that local businesses in Uganda and Tanzania have less money to grow their companies and hire more workers.

"The potential revenue loss from trade misinvoicing means that Ghana has less money to spend on healthcare, Kenya has less money to devote to education, and Mozambique has less money to invest in infrastructure.

Trade misinvoicing is perhaps the most serious economic issue plaguing these countries."

Titled, "Hiding in Plain Sight: Trade Misinvoicing and the Impact of Revenue Loss in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011," the study estimates that, collectively, trade misinvoicing may have cost the taxpayers of these five African nations US$14.39 billion in lost revenue over the decade.

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