Global
Financial Integrity (GFI) estimates that in 2013, US$1.1 trillion
left developing countries in illicit financial outflows. Its
methodology is considered to be quite conservative, as it does not
pick up movements of bulk cash, mispricing of services, or most money
laundering.
GFI estimates that about 45 per cent of illicit flows end up in offshore financial centres and 55 per cent in developed countries.
University of California, Berkeley Professor Gabriel Zucman has estimated that 6 to 8 per cent of global wealth is offshore, mostly not reported to tax authorities.
According
to GFI, Malaysia lost US$418.542 billion during 2004-2013, losing
US$48.25 billion in 2013 alone.
The
illicit capital outflows stem from tax evasion, crime, corruption and
other illicit activities. Malaysia is fifth among the top five
countries for illicit capital flight, after China, Russia, Mexico and
India, but tops the list, by far, on a per capita basis.
GFI’s
December 2015 report found that developing and emerging economies had
lost US$7.8 trillion in illicit financial flows over the preceding
ten-year period, with illicit outflows increasing by an average of
6.5 per cent yearly. Over the decade, an average of 83.4 per cent of
illicit financial outflows were due to fraudulent trade
mis-invoicing, involving intentional misreporting by transnational
companies of the value, quantity or composition of goods on customs
declaration forms and invoices, usually for tax evasion.
Many
tax avoidance schemes are not illegal. But just because it is not
illegal does not mean it is not a form of abuse, fraud or corruption.
To tackle the corruption at the heart of the global financial system,
tax havens need to be shut down, not reformed, the experts say.
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