Money leaks: N$17 billion lost per year

A Loophole in Namibia’s financial system is causing the country to lose about N$16. 7 billion per year. This is equivalent to about 9% of the country’s nominal gross domestic product (GDP). The estimated annual leakage is about 16% of the government’s total budget and more than the allocation made to the Ministry of Health and Social Services, which is N$13 billion. This money is lost through tax evasion, trade incorrect invoicing, corruption and the proceeds of crime. These figures were revealed by the country’s first comprehensive assessment of illicit financial flows shared by the Ministry of Finance yesterday. The assessment, approved by the Cabinet for publication and submission to the United Nations Statistics Division, also estimates that Namibia lost an opportunity to collect about N$2. 7 billion in tax revenue over the assessment period.

MAJOR MISINVOICING The findings provide the first consolidated estimate of money illegally earned, transferred or used across Namibia’s borders, Trade misinvoicing is identified as one of the major channels through which illicit funds leave the country. This includes companies overpricing imports to move additional money abroad, underpricing imports to reduce customs duties and value-added tax (VAT), or manipulating export values to reduce taxable income or improperly claim incentives. In some cases, exporters may also fail to declare the full value of goods sold abroad, leaving foreign currency outside Namibia’s financial system. The assessment was produced by a 14-agency technical working group chaired by the Bank of Namibia, with technical assistance from the United Nations Conference on Trade and Development (Unctad). GOVT TARGETS 5% BY 2030 The scale of the flows has prompted the government to set a target under the Sixth…