 Illicit financial flows and extractive commodities: false claims in an UNCTAD reportOlle Östensson ()
Mineral Economics, 2024, vol. 37, issue 2, No 19, 393-407 Abstract: Abstract A report by UNCTAD on illicit financial flows claims that misinvoicing of extractive commodity exports accounts for very large illicit financial flows from African countries. The report has received considerable attention, and it is possible that governments may take actions based on the assumption that the claims in the report are true. The present paper analyses these claims, focusing on South African gold exports, which account for the vast majority of the alleged illicit financial flows. Data in the source used for the UNCTAD report (UN Comtrade) are analysed in greater detail than is presented in the UNCTAD report. It is shown that the claims in the UNCTAD report are not supported by the data. It is impossible to prove any misinvoicing and anomalies in the statistics cannot be shown to be due to illicit financial flows. The authors of the report were clearly aware that misinvoicing could not be proved and that there were alternatives, more likely explanations of the statistical anomalies identified. They chose, however, to still present their claims of misinvoicing. UNCTAD produced a report with similar claims in 2016, and those claims were disproved at the time. There is very little evidence of misinvoicing in extractive commodities trade, and mirror trade analysis is in any case of very limited value when it comes to detecting or proving it. The UNCTAD report also uses mirror trade analysis in a highly questionable way that differs from the way it is applied by respected researchers. Different methods are necessary to identify or assess the magnitude of any illicit financial flows associated with the extractive industry. More granular data, supported by an understanding of international trade statistics, the international trading system and trading practices for the commodities concerned are needed in order to arrive at estimates with some degree of accuracy. UNCTAD was given an opportunity to comment on the article and did so. UNCTAD did not dispute the substance of the present article. Unfortunately, UNCTAD has refused to allow Mineral Economics to publish the comments. Nothing in the comments justified any changes in the text of the article. Keywords: Misinvoicing; Extractive commodities; Commodity trade; Tax evasion (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:minecn:v:37:y:2024:i:2:d:10.1007_s13563-023-00374-2 Ordering information: This journal article can be ordered from DOI: 10.1007/s13563-023-00374-2 Access Statistics for this article Mineral Economics is currently edited by Magnus Ericsson and Patrik Söderholm More articles in Mineral Economics from Springer, Raw Materials Group (RMG), Luleå University of Technology |
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