Poor countries get ripped off by multinational companies

Between 2002 and 2006, multinational companies have ripped off poor countries by between 98 and 106 billion dollars annually, according to a new report from Global Financial Integrity (GFI).

The countries loose tax money due to a form of mispricing. This arises when transactions are reinvoiced. This happens when goods leave a country under one invoice, which is then redirected to another jurisdiction such as a tax-haven where the price is altered. The revised invoice is then sent to the importing country for clearing and payment purposes. This is presented in the report “Implied Tax Revenue Loss from Trade Mispricing” by the GFI.

Raymond W. Baker, Director of the GFI, writes in the report that “Trade mispricing moves more illicit money across borders than any other single phenomenon.” The money lost for developing countries through this mechanism are roughly comparable to the amount of official development-assistance going into developing countries.

This is money that could help prevent poverty and to ensure a sustainable growth. However, there are ways to prevent this abuse of developing countries. One of the things we can do is inspire the world leaders to require financial transparency. Sign the petition at www.g20transparency.com and help change the world.