A report by the High Level Panel on Illicit Financial Flows published in February 2015 revealed that Africa looses up to $ 50 billion a year due to fraudulent schemes among governments and multinational companies. This amount doubles the annual official development aid that the continent receives1 making it a net creditor to the rest of the world2.
Illicit financial outflows have serious impacts on the development of the African countries and the access to basic services of their populations. Mechanisms of IFFs are “abusive transfer pricing, trade mispricing, misinvoicing of services and intangibles and using unequal contracts, all for purposes of tax evasion, aggressive tax avoidance and illegal export of foreign exchange”3.
In the foreword to the report, Thabo Mbeki, Chair of the High Level Panel and former South African president, concluded that “large commercial corporations are by far the biggest culprits of illicit outflows”, accounting for 65% of the IFFs.4 He referred this to them “having the means to retain the best available professional legal, accountancy, banking and other expertise”, and demanded that destination countries of these outflows repatriate them and prosecute the perpetrators. It must be ensured that financial institutions do not benefit from housing the capital from Africa.5.
The Panel is of the opinion that the termination of IFFs can form an essential part of the funding of the Post-2015 Development Agenda.