Trade misinvoicing: Namibia loses N$3.9bn annually
OGONE TLHAGE
WINDHOEK
Namibia lost US$152 million in trade invoicing imbalances against the world’s 32 biggest economies in 2018, and on average US$251 million every year when measured from 2009 to 2018.
When converted into Namibian dollar terms, this translates into N$2.4 billion for the year 2018 alone, data provided by United States think tank, Global Financial Integrity (GFI), showed.
As a percentage of trade, the annual average of N$3.9 billion lost during the reporting decade accounted for 24.1% of Namibia’s total trade.
GFI explained trade misinvoicing as a well-established practice of illicitly moving wealth across international borders by hiding it within the regular international commercial trading system.
For instance: If Namibia exported N$500 million worth of diamonds to Zambia, but that country recorded only having imported N$200 million in diamonds, this signals a value gap of N$300 million in the recorded trade between the two countries during a period under review.
Namibia featured among the countries with the top 10 largest value gaps for the years 2013 and 2014, ranking seventh highest and tenth in 2015, GFI found.
With Covid-19 continuing to ravage economies, GFI warned that revenue losses through trade misinvoicing are likely to aggravate efforts by developing countries to grapple with the enormous consequences of the national and international economic fallout from the global health crisis.
Illicit financial flows
“Trade misinvoicing is one of the largest components of measurable illicit financial flows,” GFI said.
It analysed the last 10 years of trade data for the 134 developing countries for which there is sufficient data available in the United Nations Comtrade database to identify the mismatches - or “value gaps” - between what any two countries had reported regarding their trade with each other.
“This is done when importers and exporters deliberately falsify the declared value of goods on the customs invoices they submit to officials when shipping or receiving goods,” GFI said.
“While there is growing recognition that the task of combatting illicit financial flows requires increased coordination among tax authorities, law enforcement and financial regulatory agencies, the task of combatting trade misinvoicing is often still placed with customs authorities alone.”
Policy recommendations
GFI has made several policy recommendations to assist countries in the fight against trade misinvoicing and illegal financial flows.
“One of the most important steps countries can take is to adopt legislation that clearly criminalises trade misinvoicing and ensures that the associated penalties are substantial enough to serve as an effective deterrent,” it said.
It also called upon countries to strengthen law enforcement capacities of customs authorities, establish multi-agency teams to address customs fraud, tax evasion and other financial crimes, implement trade misinvoicing risk assessment tools as well as to strengthen customs oversight of free-trade zones.
WINDHOEK
Namibia lost US$152 million in trade invoicing imbalances against the world’s 32 biggest economies in 2018, and on average US$251 million every year when measured from 2009 to 2018.
When converted into Namibian dollar terms, this translates into N$2.4 billion for the year 2018 alone, data provided by United States think tank, Global Financial Integrity (GFI), showed.
As a percentage of trade, the annual average of N$3.9 billion lost during the reporting decade accounted for 24.1% of Namibia’s total trade.
GFI explained trade misinvoicing as a well-established practice of illicitly moving wealth across international borders by hiding it within the regular international commercial trading system.
For instance: If Namibia exported N$500 million worth of diamonds to Zambia, but that country recorded only having imported N$200 million in diamonds, this signals a value gap of N$300 million in the recorded trade between the two countries during a period under review.
Namibia featured among the countries with the top 10 largest value gaps for the years 2013 and 2014, ranking seventh highest and tenth in 2015, GFI found.
With Covid-19 continuing to ravage economies, GFI warned that revenue losses through trade misinvoicing are likely to aggravate efforts by developing countries to grapple with the enormous consequences of the national and international economic fallout from the global health crisis.
Illicit financial flows
“Trade misinvoicing is one of the largest components of measurable illicit financial flows,” GFI said.
It analysed the last 10 years of trade data for the 134 developing countries for which there is sufficient data available in the United Nations Comtrade database to identify the mismatches - or “value gaps” - between what any two countries had reported regarding their trade with each other.
“This is done when importers and exporters deliberately falsify the declared value of goods on the customs invoices they submit to officials when shipping or receiving goods,” GFI said.
“While there is growing recognition that the task of combatting illicit financial flows requires increased coordination among tax authorities, law enforcement and financial regulatory agencies, the task of combatting trade misinvoicing is often still placed with customs authorities alone.”
Policy recommendations
GFI has made several policy recommendations to assist countries in the fight against trade misinvoicing and illegal financial flows.
“One of the most important steps countries can take is to adopt legislation that clearly criminalises trade misinvoicing and ensures that the associated penalties are substantial enough to serve as an effective deterrent,” it said.
It also called upon countries to strengthen law enforcement capacities of customs authorities, establish multi-agency teams to address customs fraud, tax evasion and other financial crimes, implement trade misinvoicing risk assessment tools as well as to strengthen customs oversight of free-trade zones.
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