The first chapter of this report seeks to explain what illicit capital flight is, its global magnitude, how it happens, and its consequences for the poor in developing countries. The chapter also explores the key role that tax havens play in capital flight. The second chapter reviews the measures that have been taken by Europe and the international community so far to combat capital flight from developing countries, as well as the reactions and actions taken in response to measures advocated by civil society organisations and academics.
In the third chapter, illicit capital flight from Africa and the specific context that it operates in is explored. Effects on the African continent are described. To provide concrete examples, case studies of Kenya, South Africa and Tanzania are presented in the fourth chapter. The chapter ‘Illicit capital flight from Africa’ and the case studies of Kenya and South Africa are written by Dr Attiya Warris. The case study of Tanzania comes from the Budget Working Group of Policy Forum in Tanzania. In the final chapter, recommendations by civil society organisations in Africa and Europe are summarised.
The discussion in this report is limited to a compilation of existing data and sources of information available on capital flight. It is not intended as a report with primary data, but instead as a survey and comprehensive compilation of work undertaken so far.
The report highlights the below issues :
Every year huge unreported flows of money are leaving developing countries, ending up in rich countries or tax havens. If properly reported this illicit capital flight would generate at least US$160 billion per year in tax revenue – more than one and a half times the total annual aid to the developing world. These are resources that could be crucial in the fight to combat poverty.
Contrary to popular belief, only a small share, three to five percent, of illicit capital flight stems from corruption. Instead, almost two thirds originate from multinational companies evading to pay tax, and one third is a result of criminal activities such as trade with humans, drugs and weapons. Despite the fact that illicit capital flight has severe consequences for developing countries – it cancels investment, undermines trade, hurts competition, worsens income gaps and drains hard-currency reserves – awareness of the measures needed to end it is low.
As a percentage of GDP, capital flight from Africa is larger than from other parts of the world. But Africa cannot stand alone to end it, cooperation and political will is required by decision makers in Europe as well as in Africa.
This report has been published in collaboration between the following organisations:
Forum Syd gathers 200 Swedish civil society organisations collaborating for global justice( www.forumsyd.org)
Policy Forum is a coalition of over 90 civil society organisations in Tanzania that seeks to influence policy processes in order to reduce poverty, promote equity, and bring about greater transparency and accountability( www.policyforum-tz.org).
Detailed report link: here