The Bank of Tanzania (BoT) is working on reports that mining and oil firms operating in the country are swindling billion of shillings through trade misinvoicing.
The Bank says in the report entitled ‘Illicit Financial Flows from the Developing World: 2003-2012’ released last week indicating “the potential tax revenue loss” over the malpractice.
The report, issued by Global Financial Integrity (GFI) covers a period of almost a decade, and shows that the country lost 462 million US dollars (about 760bn/-) which is equivalent to donors’ budget support in the first half of this fiscal year.
BoT Governor Prof Benno Ndulu told ‘Daily News’ he needed to see the report to comment extensively on the issue and said the matter needed to be examined thoroughly to plug tax loopholes.
“They (Global Financial Integrity) came to us in August and told us there is a potential revenue loss from this area (import over invoice). “We know slightly about import over invoice and we need time to go through study and work on it,” Prof Ndulu said.
The governor said misinvoicing cheats taxmen on the actual amount to be paid by firms. The central bank is much aware of overinvoicing of exports that is being used for capital flights by some investors.
On other hand, the report shows ‘Illicit financial flows are different from capital flight, a term that includes both licit and illicit capital’. Licit capital flight is recorded and tracked, significantly lowering the probability that it has a corrupt or criminal source.
“ÉSome forms of illicit financial flows are difficult to estimate with precisionÉ as they are typically intended to be hidden,” according to the GFI 2014 report. The report says many illicit transactions are carried out in cash, in order to avoid a paper (or data) trail, and are consequently not captured in government statistics.
“Trade misinvoicing is possible due to the fact that trading partners write their own trade documents. Usually, through export under-invoicing and import over-invoicing,” the report says.
That way, the corrupt government officials, criminals, and commercial tax evaders are able to easily move assets out of countries and into tax havens, anonymous companies, and secret bank accounts.
In East Africa, according to the report, cumulatively Tanzania is second after Uganda tops the list with 713 million US dollars, while Rwanda is third with 260 million US dollars.
The biggest economy in EAC, Kenya, is fourth with 121 million US Dollars and Burundi is the last in the list with 75 million US dollars. The report puts Tanzania on the 21st position in Africa and 81st globally.
The report involved at least 145 countries globally. Nigeria is the first in Africa with 15. 7 billion US dollars and South Africa second with 12.2 billion US dollars, Egypt third 3.7 billion US dollars and Zambia on fourth position with 2.5 billion US dollars on capital flights.
Globally, China leads with a total outflow of 125.242 billion US dollars in almost ten years. Sub-Saharan Africa accounted for 8.0 per cent of cumulative illicit financial flows from the developing world during 2003-2012 and Nigeria and South Africa are two Sub- Saharan African countries in the top ten globally.
The Bank says in the report entitled ‘Illicit Financial Flows from the Developing World: 2003-2012’ released last week indicating “the potential tax revenue loss” over the malpractice.
The report, issued by Global Financial Integrity (GFI) covers a period of almost a decade, and shows that the country lost 462 million US dollars (about 760bn/-) which is equivalent to donors’ budget support in the first half of this fiscal year.
BoT Governor Prof Benno Ndulu told ‘Daily News’ he needed to see the report to comment extensively on the issue and said the matter needed to be examined thoroughly to plug tax loopholes.
“They (Global Financial Integrity) came to us in August and told us there is a potential revenue loss from this area (import over invoice). “We know slightly about import over invoice and we need time to go through study and work on it,” Prof Ndulu said.
The governor said misinvoicing cheats taxmen on the actual amount to be paid by firms. The central bank is much aware of overinvoicing of exports that is being used for capital flights by some investors.
On other hand, the report shows ‘Illicit financial flows are different from capital flight, a term that includes both licit and illicit capital’. Licit capital flight is recorded and tracked, significantly lowering the probability that it has a corrupt or criminal source.
“ÉSome forms of illicit financial flows are difficult to estimate with precisionÉ as they are typically intended to be hidden,” according to the GFI 2014 report. The report says many illicit transactions are carried out in cash, in order to avoid a paper (or data) trail, and are consequently not captured in government statistics.
“Trade misinvoicing is possible due to the fact that trading partners write their own trade documents. Usually, through export under-invoicing and import over-invoicing,” the report says.
That way, the corrupt government officials, criminals, and commercial tax evaders are able to easily move assets out of countries and into tax havens, anonymous companies, and secret bank accounts.
In East Africa, according to the report, cumulatively Tanzania is second after Uganda tops the list with 713 million US dollars, while Rwanda is third with 260 million US dollars.
The biggest economy in EAC, Kenya, is fourth with 121 million US Dollars and Burundi is the last in the list with 75 million US dollars. The report puts Tanzania on the 21st position in Africa and 81st globally.
The report involved at least 145 countries globally. Nigeria is the first in Africa with 15. 7 billion US dollars and South Africa second with 12.2 billion US dollars, Egypt third 3.7 billion US dollars and Zambia on fourth position with 2.5 billion US dollars on capital flights.
Globally, China leads with a total outflow of 125.242 billion US dollars in almost ten years. Sub-Saharan Africa accounted for 8.0 per cent of cumulative illicit financial flows from the developing world during 2003-2012 and Nigeria and South Africa are two Sub- Saharan African countries in the top ten globally.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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