The recent unveiling of plans by Economic and Financial Crimes Commission to go after multinationals involved in illicit financial flows (IFFs) out of Nigeria, albeit belated, is a step in the right direction. The move is inevitable in the fight against corruption, stemming the free fall of the naira against major international currencies and more importantly exiting the nation’s economy from recession.
Acting Chairman of EFCC, Ibrahim Magu, made the disclosure in an interview with journalists on the sideline of a conference on the use of beneficial ownership information and the recovery of assets in Africa.
The event, which was hosted by the Federal Inland Revenue Service (FIRS) in Abuja, was attended by representatives of over 30 African countries to discuss the issue of illicit financial flows, tax evasion and corruption on the continent.
According to the World Bank and the United Nations Economic Commission for Africa, the continent is estimated to be losing more than $50bn annually to illicit financial flows stemming from bribery, corruption, transfer pricing, tax evasion and money laundering.
This figure represents more than the continent receives in official development assistance everywhere and is increasing at an annual rate of 9.4 per cent, which is twice as fast as the global average gross national income.
Magu described the development as worrisome, adding that a major cause of illicit financial flows was corruption. He said if the menace of corruption could be addressed, the rate of tax evasion and illicit flow of funds would be reduced. This, he noted, would free more resources for the government to implement development projects in the face of dwindling revenue.
He said the commission had opened discussions with the FIRS to set up a special unit that would deal with tax fraud, tax evasion and other related offences, particularly in multinational firms. Magu stated, “We are already discussing that and we are going to upgrade our cooperation with them, and we are going to set up a unit that will be in charge of tax fraud and tax evasion and related offences. We want to see that we work on these very seriously and we intend to use that to see how we can bring succour to the economy.
“Very soon, we will set up this unit because we have just discussed with the FIRS chairman; and so, we will sit down and organise a special training so that we can collaborate very well and chase out corruption from this country and send it back to where it is coming from. If there is no corruption, there won’t be illicit financial flows.”
The Minister of Finance, Mrs. Kemi Adeosun, who spoke at the event, said the issue of illicit financial flows had cost the continent huge losses in revenue. She said while the government had put in place measures to fight corrupt practices, it would require the assistance of other countries to tackle the issue of tax evasion and illicit financial flows.
IFFs are of policy interest partly because they drain capital and tax revenues from developing countries; multinational corporation transfer of profits from high tax developing jurisdictions to low tax jurisdictions is particularly egregious in respect to reducing tax revenues. Moving assets out of the country illegally enables tax evaders, corrupt officials and successful criminals to safely secure them from seizure by the government.
Blueprint also observes that beyond the debilitating impact of the overall capital outflows on the economy, illicit financial flows have a terrible, subversive impact on governments, victims of crime, and society. They facilitate transnational organised crime, foster corruption, undermine governance, and decrease tax revenues.
It is on the backdrop of the devastating effect of the international movement of money illegally or illicitly generated in developing countries, particularly Nigeria, that IFFs has become a major issue in the development agenda. Reducing illicit financial flows is now a component of Goal 16 of the 2015 Sustainable Development Goals, as well as a staple of declarations from the G7 and G20.
We, therefore, urge the Nigerian government to implement the four components of the reform agenda for IFFs. These include: country by country reporting of profits; listing of beneficial ownership of assets; automatic exchange of tax information and anti-money laundering (AML) provisions. This will help in no small measure in curbing IFFs and save the nation’s economy, especially the financial sector, from further decline.
