June 20, 2008
Monique Perry Danziger, +1 202 293 0740 ext. 222
WASHINGTON, DC – As rising food and fuel prices threaten to plunge millions of people in the developing world into abject poverty, Global Financial Integrity (GFI) urges curtailment of illicit capital flight as a crucial component of poverty alleviation and economic development efforts.
“We are at a critical junction in international development,” said GFI director Raymond Baker. “If we don’t do something effective now, many poor countries will actually lose ground which would undo decades of economic development and sabotage the chances of future generations to grow beyond the need for economic aid. ”
Last week’s report by the Commission for Africa made dire forecasts of worsening poverty, rising mortality, and homogenous failure to meet the Millennium Development Goals (MDGs) set in 2005.
“We are in a situation where it is increasingly clear that traditional budgetary resources are too overstretched to meet the pledges, unless innovative financing mechanisms are promptly put in place,” the report stated.
“On average, poor countries lose an aggregate $500 to $800 billion dollars a year in illicit financial outflows,” said Baker. “Curtailing this massive illicit capital flight is necessary to achieving the development and poverty alleviation targets mandated by the MDGs.”
The three causes of this capital flight, Baker noted, are commercial tax evasion, criminal activity, and government corruption.
Recent events, such as Germany’s highly publicized press of Liechtenstein to reveal banking client information after stolen bank data revealed that citizens from more than 11 countries were hiding assets in the Alpine jurisdiction to evade paying taxes, have prompted calls for reforms in EU and US finance laws. These reforms would not only help stop illegal practices such as tax evasion and money laundering, they will prevent capital flight from developing countries, according to Baker.
“It is a win-win deal,” says Baker of the efforts to make information sharing and transparency common practice in international business. “The solution is on the table, and the stakes have never been higher.”