According to data on illicit financial flows in and out of Ghana gathered by Global Financial Integrity (GFI), a Washington-based non-profit organization, illicit financial outflows from Ghana have risen sharply since 2008 to record levels.
According to a report on the nature and extent of trade misinvoicing in Ghana authored by GFI, illicit financial flows experienced by Ghana from 2008 to 2012 due to trade misinvoicing, amounted to about $22 billion – more than half of the total flows since 1960 which is estimated at $40 billion. The most affected products were cocoa, petroleum products and wood.
Exporters and importers in Ghana misinvoice trade volumes for private gain, to the detriment of the public coffers.GFI says while some of the inconsistencies in trade can be attributed to accuracy challenges and statistical issues, deliberate misinvoicing can’t be ruled out.
Exporters use under-invoicing to avoid taxes and bring less foreign exchange into the country and leave the remaining in offshore accounts. Over-invoicing of exported goods is also used to take advantage of export subsidies.
Importers on the other hand, also under-invoice to avoid tariffs and over-invoice so that they acquire extra foreign exchange from the higher price which is false.
Export underinvoicing in Ghana in 2008, amounted to outflows of $3.148 billion while inflows amounted to $1.252 billion, both of them unmatched by any year since 1960, according to the trade data gathered by GFI spanning 1960 to 2012.
In 2009, inflows due to import under-invoicing increased reached another milestone of $1.32 billion, while outflows due to export under-invoicing fell to a conservative $807 million.
In the following year (2010) illicit outflows due to under-invoicing of exports again reached a record $4.785 billion while illicit inflows from import under-invoicing fell slightly to $1.222 billion. The year saw a high total of $6 billion in illicit flows from trade misinvoicing.
In 2011, over-invoicing of exports amounted to $1.834 billion while inflows from import over-invoicing amounted to $883.9 million.The year 2012 saw inflows of $6.903 billion. Import under-invoicing amounted to $2.3 billion while export over-invoicing reached $4.58 billion.
Worryingly, GFI says that its methodology and economic models used in analysing the illicit financial outflows, are “very conservative” and there are likely to be more illicit flows that are not captured by the models.
The organisation’s President Raymond Baker said a sense of urgency is needed to effectively handle the issue which will enhance domestic resource mobilization for the benefit of Ghanaians.
ORIGINAL SOURCE: Ghana Business News by Emmanuel Odonkor