Finance minister says trade-based financial crime stretches Africa’s tax gap

Trade-based financial crime is a major cause of South Africa’s and Africa’s tax gap according to one of the continent’s most senior politicians.

South Africa’s finance minister Pravin Gordhan reckons that illicit financial flows, tax evasion and transfer pricing are all major contributors to that gap.

Development threat

At a two-day high level conference on Illicit Financial Flows: Inter-Agency Co-operation and Good Tax Governance in Africa, the finance minister told delegates that illicit flows were a threat to the continent’s development agenda.

“Tax evasion, illicit financial flows and transfer pricing are contributors to the tax gap in any country and the extent to which they are uncontrolled undermines the fiscal capacity of various countries,” he told delegates at the University of Pretoria.

Information sharing

Illicit flows have cost Africa $1 trillion over 50 years according to estimates announced last year by former South African president Thabo Mbeki (Trade Based Financial Crime, 6 February 2015) who remains an active campaigner in the fight against illicit financial flows (Trade Based Financial Crime, 4 May 2016).

In his February 2016 budget speech, Gordhan said that with effect from 2017, international information sharing agreements would enable revenue collectors to act more effectively against illicit flows generated by both multinational corporations and wealthy individuals.



Categories: Trade Based Financial crimes News