Africa faces an annual $30-$60b economic drain from illicit financial flows


-as tax experts call for urgent reforms

The Section Head of the Fiscal Investigations and Anti Money Laundering Counter-Terrorism Financing Unit, of the Mauritius Revenue Authority, Nissa Gaya, has shed light on the alarming annual economic hemorrhage faced by Africa, ranging between $30 billion to $60 billion, attributed to illicit financial flows.

Gaya’s insights, drawn from various sources, underscored the multifaceted nature of the issue, pointing to factors such as tax evasion, internal challenges, inefficient information systems, tax enforcement inefficiencies, corruption, and a lack of capacity building in high-risk areas.

Speaking on the first day of a two-day workshop, in Ghana, with a focus on assessing the digital tax training landscape in Africa, Gaya emphasized the critical need for immediate and comprehensive reforms to address the evolving risks of tax avoidance and evasion across the continent.

The figures presented by Gaya highlight the substantial economic impact of illicit financial flows, raising concerns among policymakers, tax authorities, and international organizations.

Gaya proposed a multifaceted approach to curb illicit financial flows, emphasizing the importance of digital transformation within tax administrations.

By embracing advanced technologies, African nations can enhance their capabilities to track, monitor, and combat illicit financial activities. The development of robust information systems, capable of identifying and addressing vulnerabilities, emerged as a key recommendation to fortify the continent’s financial integrity.

Furthermore, Gaya stressed the importance of implementing effective dispute-resolution mechanisms. By streamlining the resolution process, African countries can create an environment conducive to fair and swift resolution of tax-related disputes, discouraging potential perpetrators and promoting a transparent business environment.

A crucial aspect of Gaya’s recommendations centered on the necessity for African nations to stay informed about international tax issues affecting their taxing rights. With the global landscape constantly evolving.

Also, Gaya urged policymakers to proactively engage in international dialogues, ensuring that African countries are well-equipped to navigate and respond to emerging challenges in the realm of taxation.

Top of FormInsufficient capacity among tax officials remains a persistent challenge in Africa’s revenue mobilization efforts, attributed to the escalating problem of illicit financial flows through tax avoidance and evasion.

It is against this backdrop that the African Capacity Building Foundation (ACBF), in collaboration with the African-Finnish Partnerships on Taxation Capacity in Africa (AFP-TCA) Programme, endeavors to address this issue by enhancing the taxation capabilities of selected African governments and pan-African organizations.

Funded by the government of Finland and managed by the Finnish Institute of Public Management Ltd (HAUS), the AFP-TCA programme aims to bolster domestic resource mobilization (DRM) through informed policy-making and effective tax administration.

The ultimate goal of the ongoing workshop is to craft a tailored online training plan for African tax officials.

ACBF emphasizes the workshop’s objectives, stating, “We will achieve this by analyzing the existing digital tax training landscape, mapping existing players, assessing specific areas where ACBF training could make a significant impact, and formulating a value proposition to shape ACBF’s future training initiatives.”

The ACBF’s commitment extends to the development of the African Capacity Building Academy (ACB-Academy), with a strategic emphasis on digital learning as a key enabler for long-term, cost-effective capacity building.

The organization asserts an enhanced organizational capacity, incorporating tools for capacity building in tax-related matters, leadership, digital learning solutions, and improved external communication and advocacy processes.

Despite being recognized as the African Union’s specialized agency for capacity building, ACBF acknowledges its limited presence in taxation and digital learning solutions. It operates in an environment with a high potential for duplicated efforts, given existing development partners providing training and technical assistance on taxation.

Sharing insights from Kenya’s experience, Judy Magu of Kenya’s National Treasury and Planning advocated for the digital transformation of tax administrations, underscoring the effectiveness of tailored e-learning methods.

She highlighted the significance of interactive modules, live sessions with tax experts, mobile learning apps, and discussion forums to create a collaborative learning environment, fostering knowledge exchange and effective problem-solving.

Leave a Reply