Curbing IFFs Through Trade Mis-invoicing and Transfer Mispricing in Africa

The chapter examines trade mis-invoicing and transfer mispricing in Africa and suggests ways of curbing them. Trade mis-invoicing and transfer mispricing represent the biggest sources of illicit financial flows (IFFs) in Africa and lead to huge financial losses for developing countries. This is a worrying situation since it causes these countries to lose needed tax revenues which could finance their persistent budget deficits. The problem is two-fold: IFFs need to be curbed and developing countries need to earn more by way of tax revenue. As such, IFFs have been included in the SDGs as a developmental issue. SDG Goal 16.4 clearly focuses on curbing illicit financial flows while improving domestic revenue mobilisation is outlined in Goal 17.1. The chapter starts with an overview of IFFs and then continues to present an overview of trade mis-invoicing and transfer mispricing. It goes on to describe the methods by which trade mis-invoicing and transfer mispricing are measured. The chapter also presents the situation in Africa’s extractives, including a case of gold exports from Ghana, and outlines the effect of trade mis-invoicing and transfer mispricing on development. The chapter then suggests ways of curbing trade mis-invoicing and transfer mispricing and thereafter concludes.