Capital Flight: Measurement and Drivers

Strategies for Addressing Capital Flight

“…Ndikumana et al (2014) present evidence suggesting that capital account openness in the continent has been associated with somewhat higher capital flight. In the case of South Africa, lax capital account management often has been blamed for destabilizing capital outflows and for vulnerability contagion from crises in other countries.…”

“…In principle, the quantity and value of the goods should match on both invoices, so that country A's recorded exports to country B are the same as country B's recorded imports from country A. In practice, however, there are often systematic discrepancies between the two, as discussed by Ndikumana et al (2014). Exporters may understate quantities or values, or importers may overstate them, as a means for capital flight.…”

“…When a firm understates the value of imported goods on invoices submitted to African authorities (technical smuggling), or fails to report them at all (pure smuggling), the government is deprived of tariff revenue. In Africa, this often is an important form of tax evasion, as evidenced by the fact that in many countries import underinvoicing for tariff evasion substantially exceeds import overinvoicing for capital flight (see Ndikumana et al (2014)). 5…”

Capital Flight, Safe Havens, and Secrecy Jurisdictions

“…Though these practices do not fulfil the technical definition of capital flight employed in Ajayi and Ndikumana (2014), Ndikumana et al (2014) deem them to be a "first cousin to capital flight. "…”

“…It must be presumed that had African countries equivalent investigative resources at their disposal, similar or even relatively more substantial evidence of wrongdoing would be unearthed. 14 As detailed elsewhere in Ajayi and Ndikumana (2014), the son of the president of Equatorial Guinea, whose salary as a government minister came to US $8,000 a month, until recently held ostentatious wealth around the world, including luxury estates in California and France.…”