By Catherine Ageno
Developing countries are losing a significant percentage of the value of their trade transactions due to illicit financial flows.
This is according to the 2017/2018 annual Global Financial Integrity (GFI) report published following a study on trade-related illicit financial flows across 135 developing countries and 36 advanced economies.
GFI examined these countries’ trading partners, commodities, regions, and total trade percentage, among other indicators.
It identified a total value gap of US$8.8 trillion over the ten-year period.
In a statement, Tom Cardamone, President and CEO of GFI, warns that if the integrity of trade transactions cannot be assured, it is unlikely countries will be able to achieve the UN Sustainable Development Goals by the 2030 deadline.”
Cardamone also notes that of the ten countries with the largest average value gap from 2008-2017, six are in Africa and are among the poorest countries in the world, including Sao Tome and Principe, The Gambia, and Burundi.”
The act of trade misinvoicing is a major type of illicit financial flow and can be used to evade customs duties, VAT taxes, and currency controls among other illicit activities. It also deprives developing country governments of desperately needed tax revenues.