South Africa reported $1.3bn overinvoicing of iron ore exports between 2011 and 2014 ©123RF
South Africa reported $1.3bn overinvoicing of iron ore exports between 2011 and 2014 ©123RF

Developing countries miss out on billions through commodity misinvoicing

20 July 2016

Resource dependant countries are losing out on billions of dollars in export revenues because of trade misinvoicing, a report has said.

By wilfully under or overinvoicing the value of commodities in a trade, misinvoicing can reduce a company’s tax bills, circumvent currency controls or exchange payments and help avoid bureaucracy.

The technique can also be used to move and launder money.

The report, commissioned by the UN and released at the UN Conference on Trade and Development’s (UNCTAD) Global Commodities Forum, found the process was widespread in all the countries it analysed.

The report compared import and export data for five countries with a dependency on a small number of resources.

It looked at copper exports from Chile and Zambia, oil and gas from Nigeria, cocoa from Ivory Coast and iron ore, silver, gold and platinum from South Africa. 

The report found between 2000 and 2017 underinvoicing of gold exports from South Africa amounted to $78bn, or 67% of the total gold exports. Over the same period it found underinvoicing of Nigerian oil exports to the US was worth $70bn.

The report also found also numerous incidents of exported goods not appearing on the books of importing companies.

For example, between 1995 and 2014 Zambia recorded $29bn of copper exports to Switzerland, none of which appeared on Switzerland's books.

And $16bn of copper exported from Chile between 1990 and 2014 did not appear on the books of the Netherlands.

“This research provides new detail on the magnitude of the issue", said Mukhisa Kituyi, UNACTD secretary general.

The report’s findings are “made even worse by the fact that some developing countries depend on just a handful of commodities for their health and education budge,” he added.

The report said the persistency of trade misinvoicing “implies that there are important structural and institutional factors” driving the practice.

It recommends exporting countries and their development partners identify problem sources, as well as problem export destinations, and focus limited resources stopping the practice there.

The report also calls for “substantial” improvement in data gathering and the sharing of statistics.

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