By Tony Obiechina, Abuja
Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed has warned that unless Illicit Financial Flows (IFFs) are checked, they will continue to significantly erode domestic revenues and threaten economic stability.
According to her, the development will also threaten sustainable development, divert money from public priorities and hamper Government’s efforts to mobilize domestic resources and recover better.
The Minister gave the warning at an international conference on Illicit Financial flows and Assets Recovery held in Abuja on Tuesday.
She said, “Nigeria and across the African continent, we continue to suffer various forms of IFFs, including tax evasion and other harmful tax practices, the illegal export of foreign exchange, abusive transfer pricing, trade mispricing, misinvoicing of services, illegal exploitation and under-invoicing of natural resources, organized crimes, and corruption. The effects are being especially felt given the ongoing COVID-19 pandemic and the resultant deepening of fiscal constraints and public financing gaps.
“In particular, commercial activities (particularly aggressive tax avoidance and tax evasion, through trade mispricing, abusive transfer pricing, profit shifting and tax arbitraging) account for approximately 65% of illicit financial flows across Africa.
“The resulting domestic revenue losses are significant, putting developing countries and the entire African region at risk of not achieving sustainable and inclusive development, especially in the wake of the coronavirus pandemic.
Furthermore, we in Africa often find ourselves in a “race to the bottom” to attract foreign direct investments (FDIs), as a result of the current international tax practices and treaties”.
The Minister noted that with the recent United Nations Conference on Trade and Development (UNCTAD) report on the impact of illicit financial flows on African Development, “we have a better appreciation for the scope and disproportionate impact of IFFs on African countries”.
Mrs Ahmed pointed out that commercial tax evasion and other types of IFFs negatively impacted the allocation of already limited government funds, with disproportionate impact on public services benefiting women and youth, adding that curbing IFFS can lead to improvements in environmental, social, and economic development in Africa.
She stated that Nigeria as one of the most affected countries, has demonstrated strong commitment to addressing illicit financial flows through “our participation in the Open Government Partnership and the significant progress made in the extractive industry. We have demonstrated that technology-enabled improvements in tax collection and compliance help deter tax crime and facilitate public trust”.
The minister noted that the establishment of the global Financial Accountability, Transparency and Integrity Panel (FACTI Panel) has been an important step towards ensuring accountability and coordination on financial illicit flows.
She then urged multilateral organizations to develop specific rules and processes to manage and prevent illicit financial flows, stressing that “eradication of the scourge requires sustained cooperation between Africa and multilateral organizations”.
“We encourage the international community to explore and develop specific and targeted measures, including mutual legal assistance, to address barriers to international cooperation on this important matter”, she added.
