In this blog post, Joyce Kirunga calls for urgent change to curb Illicit Financial Flows. Joyce is program officer at FIDA-Uganda, an association of women lawyers and a GRRIPP project partner.
“A global human society, characterised by islands of wealth, surrounded by a sea of poverty, is unsustainable.” ~ Thabo Mbeki, former South African President.
According to Oxfam International, 1% of the world population owns as much wealth as the rest of the world combined; 63% of these economic entities are corporations. This has been enabled by a financial and global economic governance system that, for decades, has reproduced and expanded capital corporate accumulation, even as its fallen and reformed itself crisis after crisis. This wealth often originates from the global south and transfers to the north in the form of proceeds from commercial tax abuse, corrupt dealings, and criminal activities, translating into Illicit Financial Flows (IFFs).
IFFs are defined as movements of money or capital from one country to another or funds that are illegally earned, transferred, and/or utilised across an international border. The term includes tax evasion and tax avoidance schemes by transnational corporations, money laundering, and corruption.[1] The High-Level Panel on Illicit Financial Flows from Africa has established that Africa loses a lot of resources to IFFs – approximately US$50 billion annually. In the case of Uganda, IFFs account for an annual loss of over US$500 million. This directly undermines economic development, casting the country far from attaining different development agendas.[2]
Image: Ugandan Currency by Lauren Parnell Marino via/ Flickr. (CC BY-NC 2.0)
IFFs have dire effects on economies and lead to a low or lack of resources. This in turn hampers development efforts and tends to have a disproportionate effect on women, as women bear the brunt of challenges created in a low-resourced country. The UNDP equality index ranks Uganda at 131 of 162 countries in regard to gender equality which is a testament to the effects of IFFs in Uganda in the realisation of women’s rights. These effects include inefficient delivery of social services, regressive fiscal policies, and a contraction of job opportunities.
Inefficient delivery of social services
Uganda continues to face inefficient and inadequate service delivery attributed to an inadequate resource envelope.[3] Inadequacy in service delivery is majorly attributed to an inadequate tax collection system, which has a direct impact on a country’s budget deficit. This affects key areas such as education and health care and has a direct impact on women. How? Firstly, because women are marginalised by patriarchy, unequal gendered power relations, and negative entrenched cultural stereotypes, which often translate into poverty, with low-paid and poor-quality jobs. Women also predominantly do unpaid care work, which greatly impacts the advancement of their human rights because it perpetuates their impoverishment, acting as an obstacle to women’s participation in the paid economy, political life, and bodily autonomy. For these reasons, women tend to be more dependent on public social services, which can shift the unpaid care burden that falls disproportionately on their shoulders. Failure to mobilise public resources, therefore, robs women of the much-needed public services.
Regressive fiscal policies
Regressive fiscal policies are often triggered by IFFs. As countries face budget deficits, they tend to cover the same through consumption taxes, which affect the marginalised and disadvantaged. The poverty index in Uganda shows that there are more poor women as compared to men, and yet women spend a large part of their income on taxes for essential goods and services as compared to men, exacerbating the cycle of poverty and dependence. It is important to note that any tax reform, even in times of economic crisis, should not be regressive by nature and effect. Further, tax reductions, especially for the wealthy, result in the rich generally benefitting proportionately more than the poor. Tax reductions also result in a decrease in a government’s resources available to realise rights.
Contraction of job opportunities
Women’s employment is a key bedrock in fostering development and promoting women’s rights across the board. Yet, when monies are illicitly transferred out, the loss of public resources negatively impacts the economic development of a country and ultimately job creation. Similarly, when profits are illicitly transferred, reinvestment and economic expansion to create local jobs does not take place. Lack of public investment has consequently led to a lack of employment creation and greater unemployment, hitting women particularly hard. Statistics form the ILO indicate a gender gap of 1.5% of unemployment between men and women, which shows that women are more likely to become and remain unemployed and have fewer chances to participate in the labour force. When they do, they often have to accept lower quality jobs and, in instances when women have to compete with men for the same jobs, men are most likely to be favoured for the jobs.
Realising women’s rights: the way forward
Uganda is a signatory to various international conventions [4] and has also made key commitments to the promotion of women’s rights. Yet, it is clear that the biggest issue the country faces is the implementation of these commitments due to the lack of resources. Resources are a key tool for addressing gender inequality, women’s rights, and gender justice
We therefore call for concerted efforts from both state and non-state actors in curbing IFFs. Efforts should be geared towards strengthening and improving regulatory frameworks and oversight in curbing IFFs, increasing corporate accountability, and strengthening national and global justice systems to hold individuals and entities accountable.
Author bio:
Kirunga Joyce is a human rights lawyer with a bias in women rights, but also has a keen interest in intellectual property, data protection. She is a program officer at FIDA-Uganda where she supports with the programming and the advocacy aspects of the organisation.
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NOTES [1] Irene Musselli and Elisabeth Bürgi Bonanomi ‘Illicit Financial Flow: Concepts and Definition’ 2020 International Development Policy https://doi.org/10.4000/poldev.3296 [2] Agenda 2063, Sustainable Development Goals [3] In 2022/23, the budget provided for 48.1 trillion,30.7 trillion from domestic resources of which 23.7 trillion is expected to come from tax revenues while 1.79 trillion will come from non-tax revenue, leaving most sectors limping [4] CEDAW, Commission on the Status of Women, Beijing Platform for Action, Maputo Protocol.