Pretoria - Illicit financial flows from countries pose a threat to the development agenda of the African continent, Finance Minister Pravin Gordhan said in Pretoria on Thursday.
In his address at the High Level Panel on Illicit Financial Flows, held at the University of Pretoria, Gordhan highlighted the damage done to economies through tax avoidance.
“Good tax governance and cooperation between law enforcement agencies and tax authorities is an essential element to counter bribery, corruption and illicit flows,” said Gordhan.
Illicit flows and money laundering pose a danger that should be taken seriously and countries that fail to act against it, face potential financial losses.
“Money laundering, financing of terrorism and related crimes significantly undermine integrity of financial institutions and systems,” added Gordhan. This threatens a nation's financial stability and macro-economic performance and also has a spillover effect in other countries, as was seen with the Panama Papers leakage.
Gordhan pointed out that illicit flows are difficult to quantify, because they are hidden. However, it is estimated that $50bn is lost each year through tax evasion and the mispricing of trade services by multinational corporations.
The erosion of a country’s tax base impacts the fiscal capabilities of its government and the ability to improve the economy as well as the standard of living of its citizens, said Gordhan.
“Illicit money leaving the continent reduces the amount of resources available to Africa to invest in jobs and provide critical social services to citizens and economy.”