In the bid to fight against SA illicit financial flows, the Jacob Zuma-led government has signed a number of multilateral agreements.
President Jacob Zuma said this in a reply to a question by a United Democratic Movement (UDM) MP about how his government was planning to combat illicit financial flows in the country.
Nqabayomzi Kwankwa from the United Democratic Movement (UDM) had asked Zuma what measures South Africa has undertaken to counter illicit financial flows, following a high-level panel report from former president Thabo Mbeki on the matter submitted in 2015.
Mbeki who led a U.N. panel stated that Africa as a whole can create jobs, improve social services and cut poverty if its governments can stem the $50 billion a year lost in illicit outflows, mainly through multinationals.
The panel further stated that crackdowns on tax evasion and illicit financial flows and improved tax collection in developing countries would raise more money than any likely increase in foreign aid.
“This so-called overseas development assistance is money that is coming in reverse… When you trace its origin, much of it is coming from our continent.”
No lesser than $70bn (R965bn) is estimated to leave Africa annually in illicit financial flows each year.
Meanwhile, in his reply to the parliamentary question on how far his government is going in the matter, President Jacob Zuma said South Africa has signed a number of multilateral agreements to combat illicit financial flows, including information exchange controls to make it more difficult for taxpayers to hide their assets abroad.
Explaining further, the President mentioned a new a multilateral agreement called the ‘automatic exchange of financial accounts information’, as one of his government’s measures to fight SA illicit financial outflows.
Another measure according to him is that South Africa has also signed an agreement include providing tax administrations with the necessary information to do high-risk assessments, and decide if they should conduct tax audits of specific individuals.
“South Africa is among the first 60 countries that have started the first automatic exchange on September 1, 2017, and has already activated bilateral exchange relationships with 48 of the 60 countries,” Zuma said,
South Africa has till date, signed 79 tax treaties, one of which is a multilateral instrument of which 71 countries are signatories. Nigeria, Mauritius and Cameroon have been the latest countries to sign this treaty and inline with the treaty, base erosion and profit shifting measures will be included to reduce opportunities for tax avoidance by multinational companies.
Moreso, the signing of the Financial Intelligence Centre Act, which aims to develop better risk management relating to prominent individuals and enable institutions to freeze assets if identified by the United Nations Security Council, will also play an important role in combating SA illicit financial flows.
Zuma signed the legislation into law on April 29,2017. Finance Minister Malusi Gigaba has also gazetted the act and initiated steps to implement the various provisions associated with the law.
Suggestions have been made to the parliament about some 5000 cases of illicit financial flows reported to the police of which a “visible few have been pursued”.
Parliament has also conducted extensive hearings on SA illicit financial flows. Yunus Carrim, the chairperson of the standing committee on finance convened series of meetings with the police, finance, trade and industry and mineral resources oversight committees to discuss the matter.