Tax body, civil society join hands to fight illicit financial flows
Civil society organisations have joined the campaign to end illegal financial flows in the country and Africa in general.
The “Stop the Bleeding” campaign seeks to end illicit financial flows by multinationals, which are draining Rwanda’s economy and that of the continent, and is being supported by the tax body, according to the organisers.
According to Pascal, Bizimana Ruganintwali, the Rwanda Revenue Authority (RRA) deputy commissioner general and commissioner for corporate services, the tax body supports all efforts geared at crackdown on those involved in illegal movements of money to protect Rwanda from fraudsters.
“RRA will never relent it its efforts to apprehend multinationals or individuals involved in illegal financial activities designed to deplete Rwanda of its resources,” Ruganintwali said.
He was speaking at the launch of the drive last week in Kigali.
Spearheaded by Action Aid Rwanda, Governance for Africa and Tax Justice Network Africa and the taxman, the campaign is being conducted under the theme, “Tackling illicit financial flows; the Rwandan perspective.” Illicit financial flows are unauthorised movements of money or capital from one country to another.
“We understand how serious this challenge has become, especially for economies like Rwanda, that are looking to increase domestic revenues to support long-term investments,” Ruganintwali said.
He added that stopping unauthorised outflows, especially those arising from smuggling, trade misinvoicing, transfer pricing and other forms of aggressive tax planning is critical for, not only Rwanda, but also the African continent.
Billions lost annually
Angello Musinguzi, a tax expert at KPMG Rwanda, said emerging economies like Rwanda are losing a lot of money due to weak and incomplete transfer pricing mechanisms. He added that the bulk of illicit money flows is channeled through international tax havens.
“Therefore, governments must be careful when giving incentives to investors, but also ensure that revenue authorities institute strong transfer pricing units to help detect and deter illicit financial flows,” he noted.
It is estimated that Rwanda loses about $243 million annually through tax incentives and other trade related activities, while the region is losing almost $2.1 billion annually through illegal outflows.
About $80 billion leaves Africa each year through illicit outflows. As a percentage of GDP, illicit outflows in Africa are the highest globally, with multinational corporations as lead contributors, a situation that undermines the contribution of foreign direct investment and aid.
Jason Rosario Braganza, the deputy executive director of Tax Justice Network Africa, said tax incentives that are not well monitored can be a gateway to illicit financial flows if not well analysed. James Butare, the head of programmes and policy at ActionAid Rwanda, called on governments to be transparent and resolute when dealing with illegal financial flows.
“It is unfortunate that we still lose resources this way. We must, therefore, work together to reverse the situation to help preserve the continent’s resources,” he said.
According to Butare, it is important to conduct continuous public awareness about illegal financial activities as this will help address the matter more efficiently.
“We need to look at illicit financial flows as anti-development agents that curtail the ability to capture domestic resources,” Butare said.
The official added that it requires concerted action from governments and the public to fix the problem.
Speaking at the event, Fred Karemera, the head of investments and tax incentives at Rwanda Development Board (RDB), said the agency has put in place strong mechanisms to monitor what is given as incentives against benefits.
“We ensure that what we give as incentives does not deprive the country of its resources for private and public investment,” he said.
Rwanda attracted investments worth $1.675 billion in 2017, according to latest figures from RDB.
More about the campaign
The ‘Stop the Bleeding’ campaign was first launched in June 2015 to create awareness among the public on the impact of illegitimate capital outflows on the continent’s development initiatives.
It aims at mobilising citizens to demand for measures geared at curbing illicit flows as recommended by the Mbeki-led High Level Panel, which African governments have already adopted.