TAX JUSTICE AND ILLICIT FINANCIAL FLOWS

Illicit Financial Flows (IFFs) have drawn increasing attention in the Southern African region. The biggest culprits identified are multinational entities (MNEs) according to several reports by the African Union (AU), United Nations (UN) and the International Monetary Fund (IMF), with those in the extractive sector featuring prominently.

According to Billion, IFFs in the extractive sector are exacerbated by; 1) corruption by government officials who demand facilitation fees from investors and abuse of power to personal gain, 2) illegal resource exploitation by multinational corporations (MNCs) and artisanal miners, 3) tax evasion and avoidance largely by MNCs among others. Furthermore, Sub-Saharan Africa is slipping into a new debt crisis, with 40 percent of the region’s countries now at high risk of debt distress — double the proportion of five years ago. With the number of countries already unable to service their debts doubling in the past year to eight, officials at the IMF are urging all African countries to raise taxes to provide more scope for paying interest, which has increased to levels last experienced at the start of the century. The burden of increased taxes has generally been shifted to citizens, as the increase in 2018 Value Added Tax (VAT) in South Africa has illustrated. Thus, the poorest continue to be further marginalized by poor decision making by rule-setters in the North.

Objectives

EJN is committed to addressing inequalities and reducing illicit financial flows in the Southern Africa region. We continue to demonstrate this commitment by lobbying against tax injustice and advocating for mechanisms which increase financial transparency and broaden domestic resource mobilization.