How does over-invoicing on imports help illicit cash flows out of Tanzania?


Mining a rich lode of minerals, metals, or fuels might seem like a guaranteed path to wealth for many of the world’s developing countries, but two new reports argue illicit flows and secretive practices are robbing many nations, particularly in Africa, of riches that could go towards development and stability.

Global Financial Integrity, the Washington-based NGO with a reputation for analyzing large sums, believe developing countries lose about $424 billion each year when importers and exporters mislead governments about the value of goods and services, according to a new report.

The dishonesty – known as trade misinvoicing – accounts for nearly 80 percent of all the money that developing countries lose each year through illegal means. Trade misinvoicing occurs when companies charge too much (over-invoicing) or too little (under-invoicing) for imports or exports. Depending on the laws in place, this allows companies to pay less in taxes or receive more generous government assistance.

Though wide ranging in scope, GFI fingered Tanzania’s mining sector as a leading player in over-invoicing – which accounts for one slice of the estimated $1.87 billion the country loses each year. Much of this comes from importers cooking the books to charge too much for goods, like machines or fuel, to take adantage of generous government concessions and help push cash out of the country.

Link to the ICIJ press release : click here

Link to the report: click here