Tax experts are warning that a narrow definition of illicit financial flows (IFFs) is enabling looters to siphon off funds from Africa, hampering the continent’s economic growth. They advocate for an expanded definition that encompasses tax evasion and other benefits stemming from transnational crimes, bribery, embezzlement, and other illicit activities.
This broader approach, they argue, would facilitate more effective policymaking, foster international cooperation, and improve transparency in financial matters.
“We need to broaden the definition because many countries in the Global North currently limit their focus to the illegal activities of companies,” stated Chenai Mukumba, executive director of the Tax Justice Network Africa (TJNA). “The definition should include other business practices that, while not strictly illegal, have significant implications for domestic resource mobilization.”
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The lack of a universally accepted definition of IFFs has resulted in varied interpretations. Generally, illicit financial flows refer to illegal or illicit transfers of money across borders, such as money laundering, tax evasion, and financing of terrorism. These activities pose a serious threat, particularly to developing economies.
IFFs, driven by corruption, tax evasion, organized crime, and money laundering, can undermine public trust, drain resources necessary for sustainable development, and exacerbate poverty. Such flows contribute to revenue losses, especially in Africa, weakening domestic institutions, discouraging private investment, and increasing inequality.
International organizations like the G20, World Bank, IMF, the European Commission, and the African Union Commission (AUC) are closely monitoring IFFs, working to define, address, and mitigate their impact. However, their focus has often been limited to illegal activities like tax evasion, which, while providing clarity and enabling law enforcement, has been criticized for overlooking broader forms of illicit financial flows that continue to persist.
