Hon.

Irene Ovonji-Odida, Member AU/

UNECA High Level Panel on IFFs from
Africa, Outgoing Chair ActionAid Int.,
CEO FIDA-Uganda.

Background & Concept

HLP on IFFs from Africa set up Feb. 2012
by AU/ECA Ministers of Finance, Planning &
Economic Development.
ToR: to establish IFF nature, patterns, scale
& effects on development, sensitize
stakeholders including governments, &
make proposals to reverse it.
Chair H.E. Thabo Mbeki & 9 members.

Method: ECA study on trade mispricing, 2

visits, sub-regional & global consultations,
IEC/ advocacy, 6 country studies. Algeria,
DRC, Kenya, Liberia, Mozambique, Nigeria.

GFI definition: money illegally earned,

transferred or used ie illicit in origin,
movement or use.
Means: commercial, criminal & corruption
by govt officials

Commercial mainly by MNEs eg aggressive

tax avoidance schemes, concessionary
agreements, cash smuggling, capital
transfers through services or intangibles like
IPRs, trade mispricing, tax evasion, money
laundering is 60% of IFF.

Criminal- trafficking, counterfeiting,

contraband, terrorist financing is 35%.
Government corruption-bribery, abuse of
office constitutes 5%. However government
corruption enables other practices
contributing to IFFs.

1: IFFs from Africa large & increasing

$20 billion in 2001 $60 billion in 2010.
Scale: per ECA study its now ~$60bn p.a.
IFF is est. at btw 3x ODA (OECD) to 10x ODA
(Tax Justice Network).
Policy implicn: impacts on devt incl.lost tax
rev.,savings, econ. investment, & DRM for
ODA gap.

The pol. econ of IFFs core to ending it v.

powerful actors/interests & harmful gov.
effects. Polit.commitment key to action.
3: Transparency key to all aspects of IFF
Eg decl. of profits in financ. Secrecy jurisd/
use of low tax jurisd; opaque MNC in-hse
trading of inputs, IP, outputs, services;

Commerc mispricing in trade imports &

exports thru transp. in fin. reporting incl.
country-by-country account of sales, profits
& taxes paid by MNEs.
Tax avoid/ evasn declaration of benef.
ownership in comm. entities, incl. banking &
securities accts & cross-border exch of tax
info.

MNEs under-declare export quantities of oil,

gas, minerals, agric gds eg timber, fish. But
no global regime for comm IFF drivers.
5: Afr states dependence on natural
resource extraction increases
vulnerability to IFFs.
Extractv sector major area: poorly
structured kts reduce/ eliminate legit.
royalty/ tax earnings.
6: New, innovative means of IFF bring
new, increasing challenges to stop it.

Corruptn key driver of tax incentvs like tax

holidays-no relatn btw FDI/ tax incentives
FDI idue to pol. stability, cost of biznss.
Higher tax burden on SMEs due to MNE tax
abuse; yet small domestic firms boost
employt more than MNCs.
8: Corruption, abuse of pwr a cont.
concern
IFFs kill state institutions, rule of law, state
capacities, undo public confid. & divert public
money to private uses -> skew income
distribution, linked to inequality.

IFF primarily go to ext destinations tradit. & new incl.

tax havens (old & emerging).
Tunisia post-MENA uprising shows role of banks, acctg
firms, lawyers to enable MNE practices & outdo govt
cap
OECD BEPS process ->asset recov. for OECD states!
10: Money laundering continues to require
attention
Harmonized crim. laws reqd. MNEs misprice imports/
exports to avoid duties or transfer monies esp. foreign
exch abroad ~ Liberia challenge worse w USD as legal
tender.
De-regulatn, liberalizn ->hard to stem laundering

Af. Govts lack funds for public services ~

health, educ, infrast.-direct cost esp. on poor
citizens.
IFF weaken fin. sector, tax collecn, mkt reguln,
integty of public fin. systems, stability &
security. Liberalized & de-regulated econ
enable IFFs cut regulatory cap.eg customs to
stop trade mis-pricing; ensure negot of gd kts
in extractives & monitor resource exploitation.
Strong neg cap. req to shape global
architecture
ATAF initiatives relevant for cap. bldg

Uneven/ missing inst. global architecture UNCAC ~ corruption, crime but not MNEs.
13: Financial secrecy jurisd req closer
scrutiny
Transpcy, uncovering secrecy &
information, collaboration, cooperation key
challenges.
Tax havens & fin. secrecy jurisds ease regn
& enable corporate SPVs & nominal
owners (fronts) to mask beneficial owners.

Global initiatives but many not univ. applic

& dont cover Africa eg OECD BEPs.
Coop of OECD, G8, G20 reqd~richest
states & IFF destination to close global gov
gaps on means of IFFs.
15: IFFs esp comm. MNC transactns
shd be incl. in UN f/works eg SDGs,
FFDs.
Conclusion: IFFs linked to DRM & FfD:
Req. polit. will & technic cap re. powerful
interests & complexity.