Under Invoicing: Concern for African Countries

By on November 6, 2016

Ethiopia has adopted a new system to tackle trade under-invoicing that costs the country an estimated $2 billion every year. Ethiopia Customs and Revenue Authority has linked its new Customs database to global price makers which updates itself automatically. The new system will help detect cases where importers under-invoice the value of their goods in order to reduce their import duties.

“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 Sisay Bikaru, director of Ethiopia Customs and Revenue Authority (ERCA).

7aa2f82809eb42408d8c2793ff9055eaAccording to reports, Ethiopia loses $1.97 billion every year through trade under-invoicing, 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.

According to recent reports developing countries lose $85 billion a year through trade under-invoicing, with China losing the most through illicit financial flows.

 


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