A primer on illicit financial flows, tax and wage evasion in South Africa

South Africa is a nation approaching breaking point. Despite vast mineral wealth, modern infrastructure, and other economic advantages, the country faces a crisis of economic injustice. The post-Apartheid government’s reliance on a neoliberal development path has failed to transform the nation’s economic structure. It has resulted in extreme inequality, massive unemployment, low wages, and stagnant economic growth.

The problem is that this wealth doesn’t tend to stick around for long. South Africa suffers from massive outflows of wealth in the form of cross-border capital flight. This includes corporate tax evasion and avoidance, trade fraud, repayments of foreign debt, and chaotic flows from stock market speculation.

In this primer, our concern is with the general problems of capital flight, hidden profits, missing tax revenue, and economic injustice in South Africa. As a result, our use of “illicit financial flows” refers first and foremost to instances of corruption, fraud, and profit shifting practices by Transnational Corporations operating within the South African economy. These are practices that are “illicit” because they result in tax and wage evasion, and they contribute to the broader problem of capital flight. In 2019, the AIDC published a South African guide on the state of tax and wage evasion. Download it here.

*This primer was produced by the Alternative Information and Development Centre

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