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swiss private bank
swiss private bank

The African Development Bank (AfDB) estimates that illicit financial flows have drained in excess of a trillion dollars from Africa since 1980. These flows undermine the tax base, damage political institutions and exacerbate inequality.

With major momentum behind global countermeasures, there are clear opportunities for progress at the regional level ? including through stronger information exchange and co-operation, tax base harmonisation and innovative uses of trade data.

Illicit flows involve the hidden movement of profits, hidden transfers of ownership, or hidden income streams. The main motivations are tax evasion, laundering the proceeds of crime and corruption.

These will often rely on the manipulation of trade prices and the use of anonymous companies in secretive ?tax haven? jurisdictions. Because illicit flows rely on being hidden, the main counter-measures are improvements in specific elements of financial transparency.

Growing civil society demands for ?tax justice? in many countries, coupled with the sharp rise in fiscal pressures on politicians in many of the Organisation for Economic Co-operation and Development (OECD) economies since the financial crisis that began in 2008, culminated last year in a series of substantive steps in the fight against illicit financial flows.

The G8 countries took a lead on the importance of knowing the owners of companies recognising that this is important to well-functioning markets and combating corruption, and that their own lack of transparency has global ramifications.

There was agreement at the G8 and G20 meetings on the need for automatic, multilateral exchange of tax-relevant information between jurisdictions, and the OECD was mandated to produce a standard.

This includes information about ownership of assets and income streams, and beneficial ownership information is necessary to make it function and to tackle not only tax abuse, but also other areas of illicit flows.

Last year also saw a spate of high-profile reports, including those from the AfDB and the African Progress Panel, on the scale of illicit financial flows out of Africa.

The UN Economic Commission for Africa?s High Level Panel, chaired by Thabo Mbeki will publish a major report later this year.

Drawing on two years of technical analysis, case studies and multiple country visits to engage with governments and civil society, the Mbeki report?s recommendations are likely to prove influential both within Africa and in providing clear African leadership in the ongoing global processes.

There is no question then that the African policy makers are focused on the issues. They now face three major questions:

  1. What national or regional countermeasures are likely to yield benefits by reducing illicit financial flows?
  2. What national or regional countermeasures are needed to meet international responsibilities?
  3. What scope is there for greater benefits from the ongoing international processes?

The answers to all three are linked, because the opportunity to benefit from international processes will depend on regional and national actions.

Consider first the opportunity of engaging in automatic, multilateral exchange of tax information.

The East African

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