Exporters from South Africa could be in for tighter scrutiny from the revenue authorities if the recommendations in the latest Global Financial Integrity report on illicit financial flows (IFFs) are taken to heart. It reveals that fraud – or at least bending the rules to breaking point – is not confined to the revelations coming out of the Zondo commission of enquiry and other investigations. According to the report South Africa is among the biggest losers when it comes to IFFs, which are defined as “money that is illegally earned, used or moved and which crosses an international border”. This includes the deliberate misrepresentation of the value of imports or exports in order to evade customs duties and VAT, launder the proceeds of criminal activity, or to hide offshore the proceeds of legitimate trade transactions. Among the countermeasures recommended in the report are that policymakers should require multinational companies to publicly disclose their revenues, profits, losses, sales, taxes paid, subsidiaries, and staff levels on a country-by-country basis. “Customs agencies should treat trade transactions involving a tax haven with the highest level of scrutiny. “Moreover, governments should significantly boost their
customs enforcement by equipping and training officers to better detect intentional misinvoicing of trade transactions, particularly through access to the most recently available world market pricing information at a detailed commodity level,” the report adds. Globally, illicit inflows and outflows averaged 18%
in 2015, according to Tom Cardamone, managing director of Global Financial Integrity. Funded by the Finnish government, the study analyses the latest reliable International Monetary Fund (IMF) trade figures, which are from 2006-2015. In 2015, the top quintile (30) of countries, ranked by dollar value of illicit outflows, includes resource-rich countries such as South Africa ($10.2 billion) and Nigeria ($8.3 bn). European countries where money is being siphoned out include Turkey ($8.4 bn), Hungary ($6.5 bn) and Poland ($3.1 bn). However, the big numbers are in Latin America, with Mexico losing $42.9 bn), Brazil ($12.2 bn), Colombia ($7.4 bn) and Chile ($4.1 bn). Asian states in the top 30 countries of this category include Malaysia ($33.7 bn), India ($9.8 bn), Bangladesh ($5.9 bn) and the Philippines ($5.1 bn). Economic growth in South Africa’s neighbours and trading partners in the region is being severely hampered by misinvoicing. The top quintile of countries ranked by illicit outflows as a percentage of total trade with advanced economies includes Mozambique (48.1%), Malawi (44.1%), Zambia (43%), Honduras (39.7%), Namibia (38.7%) and Myanmar (30.8%).
