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PRESS RELEASE

Tackling IFFs: the role of African legislators

(NAIROBI, Kenya, April 20, 2015) The Tax Justice Network–Africa (TJN-A) and the Malawi

Economic Justice Network (MEJN) in collaboration with the Chairperson of the Natural Resources

and Climate Change Committee of the Malawi Parliament, will be hosting the second meeting of the

African Parliamentarian Network on Illicit Financial Flows and Tax (APNIFFT).

The two-day conference will be held from May 5 – 6, 2015 in Lilongwe, Malawi on the theme

“Tackling IFFs: the role of African legislators”.

In the aftermath of the multiple global economic crises which have triggered an avalanche of austere

measures in rich economies, aid budgets have suffered severe cuts. Exports of African economies

have also vacillated amidst growing joblessness and deteriorating basic social services.

As a consequence, the need for a stronger focus on domestic resource mobilisation and promotion of

alternative sources of responsible and more reliable finance for development. Illicit financial flows

(IFFs) are draining the African continent of huge resources for development. They are also

detrimental to revenue mobilisation efforts and social cohesion. Abusive transfer pricing and related

commercial activities attributed to multinational companies (MNCs) operating in Africa represent a

significant source of this outflow. Indeed, the net outflows from African countries, including the

proceeds of tax evasion, outweigh inflows of aid and investment.

The report of the AU/ECA High-level Panel on Illicit Financial Flows from Africa chaired by former

South African President, Thabo Mbeki reveals that Africa loses an estimated US$50 billion to

US$148 billion each year through illicit financial flows.

The study, “Financing Africa’s Post-2015 Development Agenda” show that, from 1970 to 2008,

Africa lost US$850 billion to US$1.8 trillion in illicit financial flows.

According to the Global Financial Integrity (GFI), Africa lost up to US$1.5trillion between 1980 and

2009 through IFFs, up to two thirds of these outflows are from the extractive sectors across Africa.

Yet, African countries need all the resources they possibly can raise domestically to address systemic

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threats and invest in post-2015 sustainable development agenda to structurally transform economies

on the continent to improve the quality of life.

A renewed political momentum globally to tackle IFFs through various international initiatives

including changing the global tax rules is currently led by the club of rich countries, Organisation for

Economic Co-operation and Development (OECD) under the auspices of the G20. However, current

efforts are neither broad nor deep enough as they are narrowly focused on measures to deal with Base

Erosion and Profit Shifting (BEPS). CSOs from Africa and across the world have called for the

introduction of international standards such as the Automatic Information Exchange, Country-by-

Country report and transparency of beneficiary ownership.

At continental and national levels African governments now recognise the crippling impacts of IFFs

and aggressive tax practices by MNCs to domestic resource mobilisation and the development efforts

of their countries, hence the President Thabo Mbeki-led panel.

A structural transformation of the continent will require an adequate, predictable, sustainable and

integrated financing mechanism geared towards financing developmental goals. Additionally, Africa

needs to embark on deliberate and concrete reforms to capture currently unexplored or poorly

managed resources. Central to this is curtailing IFFs and transforming these funds into a powerful

tool for enhancing domestic resource mobilisation to spur the continent’s development.

As public officials, and especially the people’s representatives, entrusted with the mandate to

promote and protect the well-being of their constituencies, parliamentarians are well placed to shape

policy to enhance domestic resource mobilisation as well as ensure that tax revenues are invested in

the needs of the population.

Tax is already the largest source of public finance in developing countries. African countries, for

example, raise over 10 times more revenue through taxation than through aid. If all African countries

raised just 15 per cent of GDP in revenue, the continent’s governments would have an additional

US$200 billion at their disposal annually. The key challenge is for African countries to take

measures to raise the tax to GDP ratio. One of these steps is to mobilise domestic resources through

taxation. Others include reining in illicit outflows of capital and ensuring a fairer share of natural

resource rents.

This meeting is thus designed to strengthen African legislators’ engagement and role in tackling

illicit financial flows from Africa. The meeting will update MPs on recent developments in African

on illicit financial flows and the post-2015 process, brainstorm and develop an APNIFFT programme

of work for the rest 2015 as well as agree on coordination mechanisms between APNIFFT and CSOs.

Participants include 20 MPs from all five major regional economic blocs in Africa, officials of the

Economic Commission for Africa, Africa CSOs working on IFFs and the media.

For further information, kindly contact Kwesi Obeng, Communications and Campaigns Officer at TJN-A at: kobeng@taxjusticeafrica.net (+254 728279368) and/or Malawi Economic Justice Network’s June Kambalametore at: jkambalametore@mejn.mw (+265 881112858)