China ranks first in black money outflows with a whopping $139 billion siphoned out of the country per annum between 2004-2013, according to a US-based think-tank's report.
Russia is second in the list with $104 billion average outflow of illicit finances per annum, followed by Mexico ($52.8 billion per annum) and India ($51 billion per annum), according to the annual report released by Global Financial Integrity (GFI), a Washington-based research and advisory organization, Wednesday.
Notably, India's black money outflow is more than the country's defense budget of $50 billion.
More money flows illegally out of developing and emerging countries each year than they receive in foreign direct investment and foreign aid combined. The illegal capital outflows stem from tax evasion, crime, corruption and other illicit activity, the report said. A record $1.1 trillion flowed illicitly out of developing and emerging economies in 2013, the latest year for which data is available. In all, during this decade-long period of 2004-2014, GFI estimates that more than half a trillion rupees ($510 billion) went out of India and in the case of China the figure was $1.39 trillion and Russia $1 trillion.
Titled "Illicit Financial Flows from Developing Countries: 2004-2013," the study shows that illicit financial flows first surpassed $1 trillion in 2011 and have grown to $1.1 trillion in 2013, marking a dramatic increase from 2004, when illicit outflows totaled just $465.3 billion.
China also had the largest illicit outflows of black money in any country in 2013, amounting to a staggering $258.64 billion in just that one year.
This study clearly demonstrates that illicit financial flows are the most damaging economic problem faced by the world's developing and emerging economies, said GFI President Raymond Baker, a longtime authority on financial crime.
GFI recommends that world leaders should focus on curbing opacity in the global financial system, which facilitates these outflows.
It calls on Governments to establish public registries of verified beneficial ownership information on all legal entities. And all banks should know the true beneficial owners of any account opened in their financial institution, it said. Policymakers should require multinational companies to publicly disclose their revenues, profits, losses, sales, taxes paid, subsidiaries and staff levels on a country-by- country basis. Also, all countries should actively participate in the worldwide movement towards the automatic exchange of tax information as endorsed by the OECD and the G20, it added.
Customs agencies should treat trade transactions involving a tax haven with the highest level of scrutiny, the report said. Governments should significantly boost their customs enforcement by equipping and training officers to better detect intentional mis-invoicing of trade transactions, particularly through access to real-time world market pricing information at a detailed commodity level, it said. GFI recommended that governments sign on to the Addis Tax Initiative to further support efforts to curb Illicit Financial Flows as a key component of the development agenda.
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