7 November 2017

Africa Needs to Build Capacity to Curb Illicit Financial Flows, Says Eca's Opoku-Mensah

Addis Ababa — A four-day workshop on protecting the tax base of developing countries opened here Tuesday with Aida Opoku-Mensah, ECA's Special Adviser on the Post-2015 Development Agenda, emphasizing the need to build the capacity of African nations so they can track, stop and repatriate funds lost through illicit financial flows (IFFs).

In opening remarks to the workshop that was organized by the United Nations Department of Economic and Social Affairs (UNDESA) with the support of the Italian Agency for Development Corporation, Ms. Opoku-Mensah said most developing countries do not have enough highly trained experts to prevent or punish perpetrators of tax avoidance and evasion.

"Financial outflows through illicit tax practices from developing nations can be reduced and stemmed only by enhancing and improving relevant capacities across the board," she told participants, including representatives of member States working in their respective tax and revenue authorities.

International corporations remain some of the major culprits eroding tax bases in developing nations through a range of methods, including transfer pricing, tax evasion, aggressive tax avoidance and badly negotiated tax incentives.

"The impact of these illicit financial flows on the tax revenues and investment capital of developing countries is enormous," said Ms. Opoku-Mensah.

"Regrettably, most developing countries lack the legislation and guidelines on proper taxation or effective units to address the problem."

Africa is estimated to be losing at least $50 billion through illicit financial outflows every year, according to ECA's report of the High-Level Panel on Illicit Financial Flows from Africa.

Ms. Opoku-Mensah said some countries on the continent were taking important steps in the right direction as they try to stem IFFs and protect their tax base.

Curbing illicit financial flows out of Africa, she said, would strongly bolster the continent's desire to improve and rely more on domestic resource mobilization rather than aid to fund its development.

Ms. Opoku-Mensah said domestic resource mobilization would also help ensure Africa successfully delivers on the sustainable development goals agenda.

The ECA Special Advisor said the current spotlight on taxation of multinational corporations may help reduce conflict and increase cooperation between countries without the presence of binding and enforceable legal commitments.

UNDESA's Harry Tonino said the workshop was part of a project to strengthen the capacity of developing countries to increase their potential for domestic revenue mobilization through enhancing their ability to effectively protect and broaden their tax base.

He said Agenda 2030's call that no-one should be left behind requires each country to have lots of financial resources, which he said can be mobilized through taxation.

"In that regard it's critically important for developing countries to adopt effective and efficient policies regarding tax matters," said Mr. Tonino, adding these should be coordinated with international tax notes to be effective.

For her part, Ms. Ginevra Letizia, the Head of the Italian Agency for Development Cooperation, said taxes represent a stable source of finance that is critical to financing the implementation of the 2030 Agenda for sustainable development.

She said her country fully supports Africa's quest to protect her tax base and strengthen her potential for domestic resource mobilization.

"The broad participation in this meeting shows the relevance and importance of this work for the region. This is also a great opportunity to have a broad-based discussion about how best to protect and broaden the tax base of countries in the region," Ms. Letizia said.

Participants will in the next four days discuss practical ways on how to protect and broaden Africa's tax base.

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