a plague on the economies of the African continent

Corruption, smuggling, tax evasion … Capital flight would represent $ 88 billion a year in lost earnings for the continent. An estimate from the United Nations Conference on Trade and Development, Unctad.

According to the UN, the capital flight on the continent would represent $ 88 billion, but since this is illegal practice, it is an estimate. A rather low estimate even indicates Unctad. These $ 88 billion lost to African countries more or less represent what the continent receives each year if we add official development assistance and foreign direct investment. Over fifteen years, estimates are around $ 836 billion, more than the external debt of all African countries combined. Suffice it to say that the sum is enormous.

This flight of money takes several channels. For example, according to Unctad, the gold sector accounts for two-thirds of the redirects. On the one hand, there is smuggling, we do not declare the gold mined to sell it in another country without paying tax, and there is also under-invoicing of exports. This second channel is favored by certain multinational companies that manage to take advantage of the favorable tax provisions in certain countries to declare their profits there to the detriment of the countries in which they carry on their activity.

The perverse effects of beneficial tax regimes

It is this harmful act, whether it be gold, bauxite, diamonds and other metals, that the UN condemns. Groups hide exports, underestimate their profits to redirect them to other countries. This is called treaty shopping.

Beneficial tax schemes aimed at attracting investment therefore sometimes have perverse effects if they are not adequately controlled. And it is this lack of control, which UNCTAD highlights, that recommends that states strengthen their tax systems, their customs systems, and revise tax treaties. But beyond that, the problem also comes from the international tax system, which does not demand enough from big companies. UNCTAD also wants Africa to be more involved in tax reform debates around the world.


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