Ghana loses $1.4bn annually to illicit financial flows in extractive sector

Chairman of the Public Interest and Accountability Committee (PIAC) Dr Steve Manteaw says government must put measures in place to check illicit financial flows in the extractive sector.

According to a report by the Africa Centre for Energy Policy (ACEP), Ghana on the average loses $1.4 billion annually in the natural resources sector to illicit financial flows.

The report indicated that from 2002 to 2018, cumulative gross illicit flows from trade mis-invoicing in the country amounted to $20 billion.

Illicit financial flows refer to money that is illegally earned, transferred or utilised.

Dr Manteaw revealed that some companies operating in Ghana’s extractive industry have employed creative accounting to engage in illicit financing.

He said illicit financial flows in the extractive sector from illegal mining alone cost the nation $1.7 billion.

It is estimated that from 1960 to 2018, illicit financial flows through trade misinvoicing in Ghana amounted to $45 billion.

Illicit financial flows drain nations of hard currency reserves and cause heightened inflation, cancelled investment, undermined trade, worsening poverty, and widened income gaps.

It also reduces tax revenue for the provision of public services such as health and education.

When such monies are moved out, economies do not benefit from the multiplier effects of the domestic use of such resources, whether for consumption or investment.

Multinational enterprises exhibit more tax evasion tendencies by using transfer pricing as well as offshore branches and subsidiaries mostly located in tax havens.