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$1.2B in illicit outflows from Bahamas

The Bahamas has lost as much as$1.2 billion in illicit outflows over an eight-year period to one particular form of tax evasion, according to a Global Financial Integrity(GFI)analysis.

Corruption in the form of trade mispricing was a driver of that money lost, according to GFI’s latest report on”Illicit Financial Flows(IFF)from Developing Countries: 2000-2009″, which looked at the cost of crime, corruption, and trade mispricing on developing countries.

The Bahamas is ranked 97 on a global list for largest average normalized IFF estimates from 2000 to 2008 and 112 in a country ranking of non-normalized IFFs during the same period.

The report has calculated the dollar amount estimated on the outflow from trade mispricing from The Bahamas in 2008 alone to the tune of$240 million–a steady progress from the$57 million recorded in 2000, according to the report. In total, the country lost$1.14 billion in non-normalized IFF over the period, with an average lost of$127 million calculated per year. Around$1.09 billion is calculated for normalized IFFs.

Guardian Businesscalculates more than$3 billion in non-normalized inflows to the country during the eight-year period. The year 2001 recorded the largest amount of inflows at$540 million, with 2006 coming in second at$623 million and 2007 the third highest at$560 million.

A spokesperson from the GFI said the numbers indicated that money coming into The Bahamas was not always properly accounted for, adding that the nation’s position as a leading offshore jurisdiction may be weighing heavily into that outcome.

She said the outflows category highlighted the problems the nation was having with invoicing. Their calculations are based onWorld Bank and International Monetary Fund information, with different analytical processess applied for a final result.

It comes as the government pledgesto crack down on companies currently dodging full payment of customs duties by using false invoices–the move key to stopping the loss of millions of dollars in revenue.

State Minister for Finance Zhivargo Laing recently confirmed toGuardian Businessthat significant efforts will be rolled out in the new year to take control of those losses and tighten port collections.

“It is a big problem, no doubt about that,”he said.”There are some commercial entities we understand that have set up entire operations in Florida, that produce these false invoices… maybe even dummy companies[and]they buy their stuff from their dummy companies at a price that is significantly lower than they paid.

“So that means the person pays duty on a lower price[which]reduces their duty. That’s what we understand some people are doing.”

False invoicing happens when somebody goes to the U.S. and purchases items, with the store they purchase from being complicit in producing a separate invoice at a lower price. It is a document that is then carried to the Customs Department in The Bahamas, instead of the invoice for items purchased at cost value.

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