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‘Illicit financial flows lead to budget deficit’

THE Zimbabwe Coalition for Debt and Development (Zimcodd) says lost revenue through illicit financial flows (IFFs) has far reaching consequences on the fulfilment of social and economic rights as it hinders government’s ability to fund critical economic areas.

BY VENERANDA LANGA

In a statement yesterday, Zimcodd said IFFs were affecting ordinary Zimbabweans who are struggling to get access to health, food, education and other social services.

“These lost revenues have far reaching consequences on the fulfilment of social and economic rights of the generality of Zimbabweans. The primary implication of resource leakage is budget deficit and subsequently the inability to adequately fund education, health, agriculture, water and sanitation,” Zimcodd said.

“The $1,4 billion externalised funds acknowledged by the government was sufficient to finance the entire budget for education ($905,5 million), health ($409 million) and transport infrastructure ($87,5 million).”

Zimcodd said given the continued occurrence of IFFs, there was need to strengthen citizens’ oversight role in guarding against illicit financial and resource flows as most resources are reportedly being siphoned out from resource rich communities.

An example is the leakages in the gold and diamond sectors where the minerals find their way to the parallel markets in South Africa, Mauritius, and even as far as the United Arab Emirates.

Such leakages deprive government of the much-needed revenue.

In Zimbabwe, IFFs have been rampant in the mining, fisheries, timber and wildlife sectors.

A study in 2014 found that at least $2,85 billion could have been spirited out of the country through illicit financial flows in the period 2009 to 2012.

“Government should step up efforts to curtail IFFs by enforcing anti avoidance provisions, especially towards aggressive tax planning structures in line with the current transfer-pricing framework that was introduced into the Zimbabwe tax law as of January 1, 2016,” Zimcodd said.

Other suggestions were that government should also strengthen the public finance management system to plug leakages in mining and also to implement recommendations by the Auditor-General.

“Government should invest in specialised training and empowerment of financial investigators responsible for policing economic crimes, and civic society should maintain the momentum in pushing for transparency and accountability,” they said.

“The Reserve Bank of Zimbabwe (RBZ), in its 2016 monetary policy statement, estimated that $684 million was remitted outside Zimbabwe or externalised by individuals under the auspices of free funds for various dubious and unwarranted purposes that include remittance of donations to oneself, offshore investments, externalisation of export sales proceeds by corporates through individual accounts leading to pervasive tax evasion and externalisation.”

Source: NewsDay

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