How Africa and Europe can end illicit capital flight
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 is a part of Forum Syd's publication series Global Studies. It explains illicit capital flight, how it happens, its magnitude, its consequences for the poor, and measures needed to end it. It also presents illustrative case studies from Kenya, South Africa and Tanzania.