Nexus Between Tax Havens and Illicit Financial Flow of Funds(IFFs) from Africa: A Theoretical Review

Abstract

This paper examined the nexus between tax havens and illicit financial flow of funds with particular reference to capital flows out of the African continent. Qualitative content analysis method supported with empirical data obtained from multilateral agencies was used for the study. The dataset covered forty-four (44) African countries for the period 2005-2014 respectively. Results revealed that the absence of political will, weak institutional framework, poor regulatory oversight and the unbridled scramble for the continent’s mineral resources are some of the key factors responsible for the continued rise in IFFs from Africa. The study also found that the absence of global consensus on the proper treatment of tax havens remains a challenge to fostering the needed international collaboration to fight the scourge. It therefore recommended that critical stakeholders like the press and civil society groups in their roles as public watchdogs need to do more to track and report incidences of IFFs timeously. Also, on the international front, efforts must be made to ensure that the proposed new minimum, global corporate tax rate of 15% is adhered to as a needed first step to discourage funds flow to tax havens.

Keywords: Tax Havens, Illicit financial flow of funds, Tax Evasion, Africa, Economic Development

JEL Classification: B22, E63, H26

DOI: 10.7176/RJFA/13-2-06

Publication date: January 31^st 2022