Africa is estimated to be losing more than 50 billion US$ in Illicit Financial Flows (IFF’s) annually which by far outweighs the amount of money that Africa receives in official development assistance (ODA) , making the problem of illicit financial flows one of the most challenging developmental and governance challenges of Africa today. It is undisputed that Africa has become a continent of investment choice, offering “attractive investment terms” and has seen an increase in foreign direct investment (FDI) largely from Multinational and transnational corporations and entities. Whilst the continent continues to score good growth prospects, millions of its people are struggling. Sub-Saharan Africa is the region with the highest prevalence (percentage of population) of hunger. One person per four people is undernourished.Further, many Africans cannot access proper health and educational services due to limited health facilities.
The High Level Panel Report on IFFs observes that commercial activities account for 65% of IFFs, criminal activities 30% and corruption 5%.The commercial component of IFFs relate to business activities and include hiding wealth, evading or aggressively avoiding tax, and dodging customs duties and domestic levies. By and large hiding wealth, evading and avoiding tax payments is more pronounced with Multinational Corporations (MNCs)as a result of the complex nature of the operations of MNCs.
Zambia must not be alienated from discussions on IFFs. Former Finance Deputy Minister HonorableMiles Sampa (MP) claimed that Zambia lost US$ 2billion due to tax avoidance.In addition,ActionAid Zambia in its study titled Sweet Nothings, observed that Zambia has lost tax revenue of around US$ 17.7 million attributed to the transactions of Associated British Foods Zambian subsidiary “Zambia Sugar Limited”. Further, a leaked 2009 document from accountancy firm Grant Thornton suggested that
Economic Commission for Africa, (2015). Report for the High Level Panel on Illicit Financial Flows from Africa: Addis Ababa: Economic Commission for Africap.24
BloombergBusiness (2012, November 25). Zambia Says Tax Avoidance Led by Miners Costs US$ billion a Year. Retrieved November 2nd , 2015 from http://www.bloomberg.com/news/articles/2012-11-25/zambia-says-tax-avoidance-led-by-miners-costs-2-billion-a-year
Martin, L. (2013). Sweet Nothings. Lusaka: Action Aid Zambia, p.1