Misinvoicing of trade costs Africa millions in revenue

The fraudulent misinvoicing of trade is hampering economic growth and potentially resulting in billions of United States (US) dollars in lost tax revenue in Ghana, Kenya, Mozambique, Tanzania, and Uganda, according to a new report published on Monday by Global Financial Integrity (GFI), a Washington DC-based research and advocacy organisation. 

The study — funded by the Ministry of Foreign Affairs of Denmark — finds that the over- and under-invoicing of trade transactions facilitated at least US$60.8 billion in illicit financial flows into or out of the five African countries between 2002 and 2011.

“It is deeply disconcerting that illicit financial flows are taking such a serious toll on the economies of Ghana, Kenya, Mozambique, Tanzania, and Uganda,” noted Mogens Jensen, Danish minister for trade and development cooperation.  “Denmark has for several years supported Ghana, Kenya, Mozambique, Tanzania and Uganda in fighting poverty and promoting economic growth and job creation. These efforts are clearly at risk of being undermined by fraudulent trade transactions. I hope that the study can help the governments in their efforts to curb illicit financial flows.”

Titled ‘Hiding in Plain Sight: Trade Misinvoicing and the Impact of Revenue Loss in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011’, the study estimates that, collectively, trade misinvoicing may have cost the taxpayers of these five African nations US$14.39 billion in lost revenue over the decade.  The potential average annual tax loss from trade misinvoicing amounted to roughly 12.7% of Uganda’s total government revenue over the years 2002-2011, followed by Ghana (11.0%), Mozambique (10.4%), Kenya (8.3%), and Tanzania (7.4%).