Each year, Ghana loses an estimated $1.4 billion due to illicit financial flows
GhanaWeb Feature by Mawuli Ahorlumegah
Each year, Ghana loses an estimated $1.4 billion due to illicit financial flows, a staggering figure that continues to deprive the nation of critical resources for development.
According to the Tax Justice Network Africa (TJNA), the country is among those hemorrhaging significant revenue due to tax evasion, excessive tax exemptions, and systemic inefficiencies within its tax system.
At a recent summit of the African Parliamentary Network on Illicit Financial Flows and Taxation, held in Ghana, experts painted a grim picture of how these financial outflows are draining Africa’s economic potential.
Speaking to the media in June 2024, Francis Kairu, Strategic Programmes Director at TJNA, highlighted how multinational corporations and weak tax enforcement mechanisms contribute to the country’s revenue losses.
“Our governments must also acknowledge that the problem is a major issue, and I think the biggest challenge in our generation now is the issue of illicit financial flow,” Kairu stated.
“Ghana is one of the countries that losses the most because you have natural resources, you have a huge population that is being taxed. You also have multinational companies in this country, and you are losing over $1.4 billion every year to the activities of these multinationals and illicit financial flows. Ghana is one of the countries that grant tax exemptions and tax holidays every other day,” he added.
This issue extends beyond Ghana. A report from the United Nations Conference on Trade and Development (UNCTAD) estimates that Africa as a whole loses nearly $89 billion annually through illicit financial flows.
The report even described the continent as a “net creditor to the world,” highlighting the irony that, while Africa remains heavily reliant on foreign aid, it simultaneously loses far greater sums through capital flight and tax abuse.
Experts argue that much of these losses stem from the export of commodities like gold, diamonds, and platinum, where companies under-declare the value of their exports to minimize tax obligations.
Some businesses are also accused of falsifying financial records, mispricing goods in trade transactions, and engaging in transfer pricing manipulation to shift profits to lower-tax jurisdictions.
For Ghana, the consequences of these losses are severe. The country faces mounting debt and budget deficits, making it increasingly difficult to fund essential services such as education, healthcare, and infrastructure.
While policymakers continue to discuss reforms, stakeholders believe that stronger tax laws and better enforcement mechanisms are needed to curb illicit flows and retain more of Ghana’s wealth within its borders.
The battle against illicit financial flows is not just an economic challenge; it is a fight for national sovereignty, sustainable development, and financial justice.
But the question remains; how long can Ghana afford to lose billions before decisive action is taken?
MA