African governments, including Rwanda, should design punitive and effective laws to curtail illicit capital flows, experts have said. According to the experts, Africa loses over $100 billion (about Rwf78.6 trillion) annually through illicit financial outflows, profit repatriation and bad treaties signed between governments and multinationals.
Josephine Uwamariya, the Action Aid International-Rwanda country director, also said there is need for transparent systems to ensure proper accountability, noting that these were some of “the tools that will enforce tax justice on the continent”.
Uwamariya argued that promoting tax justice is essential to boost public service delivery and thus reduce poverty on the continent.
“Therefore, we have to make sure that the incentives given to investors are targeted and designed to improve service delivery as well as promote sustainable economic growth on the continent.”
A 2011 report by the Action Aid and Tax Justice Network for Africa indicates that Rwanda lost over Rwf390 billion through various kinds of tax incentives in 10 years.
Uwamariya was speaking ahead of the 9th Joint Annual Ministerial meeting for finance ministers across the continent that starts today in Addis Ababa, Ethiopia. The African Development Week that started on Thursday last week is part of the activities that go with the annual finance ministers’ meeting. The finance ministers’ meeting is expected to deliberate on strategic approaches that will help in the implementation, monitoring and evaluation of agenda 2063, and the sustainable development goals. They are expected to launch the Economic Commission for Africa’s flagship Economic Report for Africa 2016 report.
Luckystar Miyandazi,Tax power Africa coordinator for Action Aid International, said incentives given to investors must be designed in a way that does not translate into tax losses.
“A lot of money is being lost by the continent because some multilateral companies take advantage of loopholes in our laws to dodge or avoid taxes, while others siphon out money by corrupting government officials.
Meanwhile, Anthony Mothae Maruping, the commissioner economic affairs at the African Union, said the commission was designing a transformative blueprint to support the fight against illicit financial flows.
“It is unfortunate that some of the illicit financial flows is considered legal because of the bad tax treaties some African countries sign with multinationals. It is against this background that the commission is working with stakeholders to design modalities that will help stop illicit financial flows from the continent,” Maruping said in a statement last week.