ADDIS ABABA (HAN) January 4, 2016 – Public Diplomacy and Regional Stability Initiatives News. Ethiopia has installed a new system to tackle trade misinvoicing that costs the country an estimated $2 billion every year.
Ethiopia Customs and Revenue Authority (ERCA) director Sisay Bikaru said the taxman has installed a new Customs database that is linked to global price makers; the database updates itself automatically. He said this would help detect cases where importers underdeclare the value of goods in order to reduce their tax assessments.
“We are also identifying the major importers in the country for close follow-up by our intelligence unit. We also have a plan to pay up to 10 per cent of the recovered tax money to members of the public who inform us of tax fraud,” said Mr Bikaru.
The Global Financial Intelligence (GFI) report for 2015, released last month, shows that Ethiopia loses $1.97 billion annually through trade misinvoicing, and a further $630 million every year through illicit financial flows. The losses constitute five to 10 per cent of the country’s GDP.
Uganda, Tanzania and DR Congo lose about $720 million, $480 million and $225 million annually to illicit flows. In Africa, South Africa is ranked top at $20.9 billion lost through illicit flows annually, followed by Nigeria at $17.8 billion, Morocco at $4.1 billion, Egypt at $3.9 billion, Zambia at $2.8 billion and Cote d’Ivoire at $2.3 billion. Ethiopia’s tax to GDP ratio stands at 13 per cent, compared with 15 per cent for sub-Saharan Africa.
The GFI report estimated that developing countries lose $85 billion a year through trade misinvoicing, with China losing the most through illicit financial flows. Over the 10-year period covered by the report, China lost $1.39 trillion, followed by Russia, Mexico, India, and Malaysia. China also had the largest illicit outflows of any country in 2013, at $258.64 billion.