Fraudulent trade invoicing in five African countries cheated taxpayers out of a combined US$14.4 billion in revenue in the 10 years to 2011, and in Uganda’s case losses amounted to an eighth of annual government revenue, research showed on Sunday.
The tax authorities in the five countries studied by Global Financial Integrity (GFI) — Ghana, Kenya, Mozambique, Tanzania and Uganda — lacked the trade, tax and deals data to curb the illicit flows, it said in a research report.
Inaccurate invoicing in the five countries facilitated the illegal inflows or outflows of more than US$60 billion during that decade, GFI said.
Kenya lost an estimated US$1 billion each year through export underinvoicing, where sellers deflate the true value of their exports so they can channel the difference to a foreign account.
Tanzania, on the other hand, lost a similar amount to export overinvoicing, which overvalues shipments so parties can collect export credits.
Uganda had US$813 million in import overinvoicing, which can lead to lower corporate taxes as companies puff up the cost of imports to hide capital outflows.
GFI said its study published yesterday was “extremely conservative” as it left out incorrect invoicing for services, bulk cash deals or hawala transactions, a form of money transfer used in the Muslim world.
“Trade misinvoicing is perhaps the most serious economic issue plaguing these countries,” GFI president Raymond Baker said in a statement.
“We are talking about a huge drainage out of these countries,” Baker said. “People are making millions and millions at the expenses of the world’s poorest people.”
Baker said nearly all companies dealing in Africa that were household names had used the scheme, which he said was in effect “stealing from African governments.”
The report, commissioned by the Danish government, compares the official price paid for goods with the global market price, but does not name any companies or officials.
Ghana had more than US$14 billion in misstated invoices over the 10-year period, equivalent to 6.6 percent of its GDP, while Mozambique’s US$5.3 billion was equal to 9 percent of GDP.
A report by the African Development Bank last year showed net outflows from Africa’s resources sector totaled up to US$1.4 trillion over the three decades up to 2009, far exceeding inflows.
Additional reporting by the Guardian
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