Developing countries lost nearly $1 trillion in 2012 due to tax evasion and corruption, according to a new report.
A record $991bn (£634bn) ‘disappeared’ from some 151 poor and middle income nations in the period surveyed, according to US-based Global Financial Integrity (GFI).
The figure is a 5% increase on the previous year.
The report, titled “Illicit Financial Flows from Developing Countries: 2003 - 2012”, found that China, Russia, Mexico, India, Malaysia were the biggest exporters of illicit capital which researchers said was facilitating crime and corruption around the world.
GFI President Raymond Baker said: “As this report demonstrates, illicit financial flows are the most damaging economic problem plaguing the world’s developing and emerging economies.
“These outflows — already greater than all Foreign Direct Investment flowing into these countries — are sapping roughly a trillion dollars per year from the world’s poor and middle-income economies.”
“Most troubling, however, is the fact that these outflows are growing at an alarming rate of 9.4 percent per year—twice as fast as global GDP,” Mr. Baker added.
The report revealed that the total amount of illegal outflows topped $6.6 trillion in the years surveyed.
The fraudulent mis-invoicing of trade transactions was revealed to be the largest component of illicit financial flows from developing countries, accounting for 77.8 percent of all funds.
This involves fraudulently manipulating the price, quantity or quality of a good or service on an invoice.
The US$991.2 billion that flowed illicitly out of developing countries in 2012 was greater than the combined total of foreign direct investment (FDI) and net official development assistance (ODA), which these economies received that year.
Illicit outflows were roughly 1.3 times the US$789.4 billion in total FDI, and they were 11.1 times the US$89.7 billion in ODA that these economies received in 2012.
Report author Joseph Spanjers said: “Illicit financial flows have major consequences for developing economies. This is a trillion dollars that could have contributed to inclusive economic growth, legitimate private-sector job creation, and sound public budgets.”
India, where the issue of so-called ‘Black Money’ has dominated political debates in recent months, was the only South Asian nation in the top 25 countries with the biggest outflows.
The report found that India averaged nearly $44 billion in illegal outflows and corruption over the entire period with the total figure topping $440 billion.
Remarkably, a large chunk of that total – more than $94 billion – was accounted for in 2012 the third highest figure after China and Russia.Read More »