Nadine Evelyne UMUBYEYI
As the Africa initiative aims to unlock the potential of tax transparency and exchange of information for Africa, by ensuring that African countries are equipped to exploit the improvements in global transparency to better tackle tax evasion; Rwanda took part in 38 countries members of Africa Initiative.
The Illicit Financial Flow (IFF) refers to the movement of money across borders, that is illegal in its source. Like moving money illegally from one country to another, while the income is from illegal activities as tax evasion, drug sales, dirty money transfers, …
In such regard, Rwanda committed to undertake the first automatic exchanges of financial accounts information, by a specific date, as together with other 3 countries (Madagascar, Burkina Faso and Mauritania) they deposited their instruments of ratification by 2024. And Rwanda expects the implementation of such automatic exchange of financial account information, by 2025.
Illicit flows not only minimize the revenues needed for improving governance institutions, but also negatively affect growth-enhancing investment such as infrastructure development. They erode legitimacy of economic activities and thus thwart vital economic development.
In Africa, illicit financial flows are estimated between $50 and $80 billions annually, as 44% of Africa’s financial wealth is thought to be held offshore; which corresponds to tax revenue losses of 17 billion Euros, says the report.
African countries leaders have to put emphasis on setting mechanisms to fight illicit financial flows, as the fraud costs the continent billions of dollars every year.
Africa efforts
Most developing countries are more dependent on taxes levied on companies, rather than those derived from personal incomes; as many of them are from Africa continent, they have to fight against Illicit Financial Flows to better raise their economic development.
Like some economists claimed, African countries need to build their own policies on the resources exploitation, as well as the tax administrations.
Dr Ndagijimana Uzziel (Former Minister of Finance and Economic Planning) said “For Africa to improve its tax position, we must act now to improve both our tax policies and the capacity of tax administrations. This will reduce our dependence on foreign aid, drainage of Africa’s resources; increase our domestic investments, job creation and ultimately economic growth.”
Under the Agenda 2063, Africa committed to strengthen domestic resource mobilization, build continental capital markets and financial institutions, and reverse the illicit flows of capital from the continent, in order to: Build effective, transparent and harmonized tax and revenue collection systems; Reduce aid dependency; Enhance domestic savings and eliminate all forms of illicit flows.
