The Panama Papers have prompted governments to look more seriously at the costs of trade mispricing and illicit financial flows
Following the leak of over eleven million company files from the Mossack Fonseca law firm in Panama on 3 April, many African activists and law enforcement officers have been searching the documents for evidence of malfeasance. Of course, being a client of Mossack Fonseca, whose premises were raided by Panamanian police on the morning of 13 April, and establishing shell companies in Panama is legal for nationals of many African countries.
However, when those entities are part of a scheme to misprice transactions deliberately or to evade tax, they are increasingly being picked up by African regulators and tax authorities. Driving those investigations are the effects of the commodity price crash, which has sharply cut state revenue in resource-rich countries and the campaign, led by South African ex-President Thabo Mbeki
, to staunch the illicit financial flows from Africa (see Chart) which his United Nations-backed investigation says are running at over US$60 billion a year. The Paris-based Organisation for Economic Cooperation and Development reckons that illicit financial flows – deliberate trade mispricing and tax evasion – out of Africa are running at three times the level of foreign aid coming in.
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