Illicit Financial Flows

The escalating concentration of global extreme poverty is particularly pronounced in Africa, where the continent presently accounts for 55% of the total worldwide poverty. Reports indicate that these numbers are expected to rise due to the enduring impacts of climate change, the COVID-19 pandemic, and the conflict in Ukraine. As we hit the six-year mark before the designated milestone for achieving the Sustainable Development Goals (SDGs), it is apparent that African nations are still notably behind in making substantial strides toward the specific targets outlined in the SDG Agenda. Expanding upon the United Nations Millennium Development Goals (MDGs), which concluded in 2015, the SDGs underscore the commitment to addressing a broad spectrum of global challenges. The SDG Agenda tackles 17 pivotal development challenges, spanning areas such as poverty, health, gender equality, crucial aspects of economic growth, urgent global warming issues, social justice, and the promotion of peaceful and inclusive societies. Globally, there is a recognition that countries bear the primary responsibility for addressing systemic issues leading to revenue loss, and global cooperation is essential to supporting national efforts in achieving the SDGs. Within the African context, there have been calls to African leaders to address structural barriers impeding domestic resource mobilization as a key to the successful implementation of development projects aimed at enhancing the lives of African citizens. This is viewed as a sustainable solution to confront the severe and multidimensional nature of poverty in African nations, requiring concerted efforts from leaders to reshape policies that currently facilitate capital outflows.

The Global South Dialogue on Economic Crime (GSDEC)’s inaugural conference themed Financial Regulation: A global south perspective which held on the 21st of August 2021 was hosted by Aston University, Birmingham. The conference was focused on critically examining whether the current global financial regulatory framework is best suited to combat financial and economic crime in the Global South effectively.

August 6, 2021

Global South countries continue to lose an immeasurable, though, significant amount of funds yearly to illicit financial flows (IFFs), notwithstanding improvements in global regulatory structures aimed at curbing financial crime. Consequently, it is critical to examine whether the current global regulatory framework is best suited to effectively combat financial crime in the Global South. 

The African Sovereign Debt Justice Network brings to you an update of African sovereign debt news and updates on events and happenings on and about Africa that reveal how sovereign debt issues are engaged by the various stakeholders.

The primary objective of this post is to highlight the importance and gravity of the existing tax evasion in Latin America and the Caribbean today. A study conducted by Santiago Diaz de Sarralde Miguez reports that Latin America and the Caribbean are characterized by a relatively low tax burden, which averages 22.8% of GDP. That is 11.5% less than the OECD (2015). While it is true that there are large differences between countries, as the tax burden varies from 12.4% in Guatemala to 38.6% in Cuba.

Development, particularly in developing countries, in the current context requires thinking about how multiple global crises are interlinked, their impact on development prospects, and the narrative framing needed to generate positive and progressive systemic policy change.

In the meantime, since the re-entry of Mozambique into the international debt markets may take time, the poor communities may not have the wherewithal to survive that long.  So, what is the last piece of the puzzle? An IMF arrangement with conditionalities? What conditionalities? My next piece intends to consider this.

The quality of public service delivery has been shown to affect tax non-compliance in an important way. Among other issues that have been attributed to low tax revenues in Nigeria, the State of the fiscal social contract can be said to be the single most important underlying cause. While there remains a depth of systemic issues to be resolved in order to rebuild the broken links in the fiscal social contract properly, the predicted post-pandemic impact on digital communication and business provides Nigeria with the opportunity to leverage on digital growth and engagement to bargain a stronger social contract, particularly with its largest demographic.

Rwanda envisions itself as the next Luxembourg or the next Singapore; a new financial center that will turn East Africa into an international power player and will service financial transactions throughout the African continent and beyond. While other financial centers are often accused of being tax havens, Rwanda is determined to avoid that label. It says the new hub, the Kigali International Financial Center (KIFC), will not allow business activity designed to avoid taxation. Details are forthcoming but Rwanda Finance Limited, the government entity that is developing the project, says all investments at KIFC must have a substantive business and economic purpose.

This paper aligns with Godwell Nhamo who states that ‘if the SDGs are to be a vehicle for poverty eradication in Africa, then the continent needs to do more for itself, including domestic mobilization of financial resources’. In essence, effective partnerships or collaborations (e.g. between government, academia, public sector, private sector, civic society and local communities amongst others) need to be developed in order to achieve sustainable SDGs outputs.