Top row: From left John Dramani Mahama of Ghana, Uhuru Kenyatta of Kenya and Armado Guebuzza of Mozambique. Underneath: President Takaya Kikwete of Tanzania and Yoweri Museveni of Uganda.
Hiding In Plain Sight: Trade Misinvoicing And The Impact Of Revenue Loss In Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011
By Christine Clough, Dev Kar, Brian LeBlanc, Raymond Baker, Joshua Simmons,
A case study on the impact of trade misinvoicing in Ghana, Kenya, Mozambique, Tanzania, and Uganda—titled “Hiding in Plain Sight: Trade Misinvoicing and the Impact of Revenue Loss in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011”—found that the fraudulent over- and under-invoicing of trade is hampering economic growth and costing these developing governments billions of U.S. dollars in lost revenue.
Primary Findings
Between 2002 and 2011, US$60.8 billion moved illegally into or out of Ghana, Kenya, Mozambique, Tanzania, and Uganda using trade misinvoicing: Gross Illicit Flows from Ghana, Kenya, Mozambique, Tanzania, and Uganda, 2002-2011, millions of USD | No data from Mozambique and Kenya for 2011.
The report is only the second by GFI to use our new methodology to estimate tax revenue loss from trade misinvoicing. The study finds that the potential average annual tax loss from trade misinvoicing amounted to roughly 12.7% of Uganda’s total government revenue over the years 2002-2011, followed by Ghana (11.0%), Mozambique (10.4%), Kenya (8.3%), and Tanzania (7.4%
Methodology
GFI Chief Economist Dev Kar and GFI Junior Economist Brian LeBlanc developed robust economic models that highlight the drivers and dynamics of illicit flows in both directions for each of the five countries analyzed. Nevertheless, GFI cautioned that their methodology is very conservative and that there are likely to be more illicit flows into and out of these countries that are not captured by the models. GFI notes that—due to data issues, varying customs rates by commodity and sector, and various other factors—it is difficult to assess the true tax revenue loss stemming from trade misinvoicing in a particular country. The tax loss figures presented in this study are rough estimates of the possible impact that trade misinvoicing could have on government revenues in Ghana, Kenya, Mozambique, Tanzania, and Uganda.
Country-Specific Findings
| Ghana | Kenya | Mozambique | Tanzania | Uganda | |
|---|---|---|---|---|---|
| Ghana | Kenya | Mozambique | Tanzania | Uganda | |
| Cumulative Trade Misinvoicing Outflows | US$7.32bn | US$9.64bn | US$2.33bn | US$8.28bn | US$8.39bn |
| Cumulative Trade Misinvoicing Inflows | US$7.07bn | US$3.94bn | US$2.93bn | US$10.44bn | US$457mn |
| Gross Cumulative Trade Misinvoicing Inflows + Outflows | US$14.39bn | US$13.58bn | US$5.27bn | US$18.73bn | US$8.84bn |
| Gross Annual Trade Misinvoicing as % of GDP | 6.64% | 7.76% | 8.98% | 9.36% | 7.05% |
| Gross Annual Trade Misinvoicing as % of ODA | 189.17% | 288.63% | 49.51% | 131.21% | 97.94% |
| Cumulative Outflows via Export Under-Invoicing | US$5.1bn | US$9.26bn | US$1.26bn | 0 | US$261mn |
| Cumulative Outflows via Import Over-Invoicing | US$2.21bn | US$377mn | US$1.08bn | US$8.28bn | US$8.13bn |
| Primary Method for Shifting Money Illicitly out of Country | Export Under-Invoicing | Export Under-Invoicing | Both Export Under-Invoicing & Import Over-Invoicing | Import Over-Invoicing | Import Over-Invoicing |
| Cumulative Inflows via Import Under-Invoicing | US$4.6bn | US$3.94bn | US$2.22bn | US$108mn | 0 |
| Cumulative Inflows via Export Over-Invoicing | US$2.43bn | 0 | US$711mn | US$10.34bn | US$457mn |
| Primary Method for Shifting Money Illicitly into Country | Import Under-Invoicing | Import Under-Invoicing | Import Under-Invoicing | Export Over-Invoicing | Export Over-Invoicing |
| Cumulative Tax Revenue Loss via Trade Misinvoicing ^1 | US$3.86bn | US$3.92bn | US$1.68bn | US$2.48bn | US$2.43bn |
| Average Annual Tax Revenue Loss via Trade Misinvoicing ^1 | US$386mn | US$435mn | US$187mn | US$248mn | US$243mn |
| Tax Revenue Loss via Trade Misinvoicing as % of Total Government Revenue ^1 | 11.0% | 8.3% | 10.4% | 7.4% | 12.7% |
FOOTNOTES
- GFI notes that—due to data issues, varying customs rates by commodity and sector, and various other factors—it is difficult to assess the true tax revenue loss stemming from trade misinvoicing in a particular country. The tax loss figures presented in this study are rough estimates of the possible impact that trade misinvoicing could have on government revenues in Ghana, Kenya, Mozambique, Tanzania, and Uganda.
- All monetary values are expressed in U.S. dollars (USD).
Some of the graphs didn’t appear at this website, thus; beneath is the link to the original article: http://www.gfintegrity.org/report/report-trade-misinvoicing-in-ghana-kenya-mozambique-tanzania-and-uganda/
