An anti-corruption court court could become a powerful force in combating corruption and illicit financial flows. (Getty Images)
In an increasingly interconnected world, the complexities of financial regulations and the sheer scale of corruption have outgrown the capacities of individual nations to address them effectively. The International Court of Justice, the UN’s judicial arm, has been the cornerstone of adjudicating international treaties and conventions. But its scope is limited, and nations can opt out of its jurisdiction, as seen with the United Nations Convention Against Corruption.
This loophole in the international justice system leaves a gaping vulnerability in the fight against corruption. Enter the proposed International Anti-Corruption Court (IACC), a judicial body that could provide an invaluable solution to these challenges, particularly within the framework of a proposed UN Tax Convention. The IACC could emerge as a powerful force in combating corruption, illicit financial flows (IFFs), and tax evasion, issues that have stifled the economic potential of developing nations, particularly in Africa.
A new global tax body, proposed under the auspices of the United Nations, has the potential to reshape how tax norms are created and enforced on an international scale. Known as the UN Tax Convention, this initiative seeks to establish a multilateral, democratic fiscal body where every nation, irrespective of economic power, plays an active role in the decision-making process. This proposal is not merely about regulating taxation — it is about addressing the fundamental inequalities embedded in international financial systems.
The gap between rich and poor nations has widened, and one of the significant drivers of this disparity is the loopholes and grey areas in international tax laws. Multinational corporations (MNCs) and high-net-worth individuals (HNWI) routinely exploit these gaps, employing tactics such as transfer pricing, trade mis-invoicing, and shifting profits to low-tax offshore jurisdictions. These activities, which constitute illicit financial flows, rob nations — particularly developing ones — of the revenue needed for essential services like healthcare, education, and infrastructure.
The magnitude of illicit financial flows in Africa is staggering. Estimates suggest that African nations lose between $50 billion and $89 billion annually to IFFs. According to the African Union and the United Nations Conference on Trade and Development (UNCTAD), this loss represents approximately 3.7% of the continent’s GDP. The implications are dire: countries struggling with poverty, underdevelopment, and poor infrastructure are being deprived of crucial resources through corruption and tax evasion by both domestic elites and foreign corporations.
Oxfam’s report, “Africa: Rising for the Few,” highlights the extent of this problem. In 2010 alone, Africa lost $11 billion due to tax avoidance strategies employed by multinational companies. This figure is six times the amount required to address the healthcare funding gap in Ebola-stricken countries like Sierra Leone, Liberia, Guinea, and Guinea-Bissau. It’s clear that the stakes are high, and the need for robust international mechanisms to combat these flows is urgent.
It’s not just foreign corporations that are to blame. High-profile cases involving African business magnates and political elites who evade taxes have become all too common. These individuals often engage in complex avoidance schemes or conceal their assets offshore, further exacerbating the continent’s economic challenges. Corruption and tax evasion are interlinked, feeding into a vicious cycle that hinders development, perpetuates inequality, and undermines governance.
One of the most effective tools in the fight against corruption is beneficial ownership transparency (BOT). BOT requires the public disclosure of the individuals who ultimately own or control a company, making it far more difficult for corrupt individuals to hide their assets. By pulling back the curtain on opaque corporate structures, BOT can help prevent illicit activities like money laundering and tax evasion.
The UN Tax Convention could serve as the foundation for these transparency efforts. By establishing automatic information exchange, public country-by-country reporting, and a global asset registry, the convention would significantly improve the ability of governments and international bodies to track wealth and ensure that corporations and individuals pay their fair share of taxes. Such measures would also lay the groundwork for a shift toward unitary taxation, where multinational companies are taxed based on the economic activity they generate in each country, rather than where they declare their profits.
Debt is another critical issue that ties into the larger conversation about corruption and international financial obligations. Many African nations are trapped in a cycle of borrowing and repayment, often under unfavourable conditions. Corruption plays a significant role in worsening these debt crises. Political elites embezzle borrowed funds, while non-transparent loan agreements create opportunities for personal gain at the expense of national development.
The taxpayer ultimately bears the burden of repaying these debts, highlighting the critical role that tax revenue plays in sustaining a nation’s financial obligations. If corruption and illicit financial flows are not addressed, the cycle of borrowing and debt will continue, locking nations into a perpetual state of dependency and underdevelopment.
This brings us to the International Anti-Corruption Court (IACC). The IACC could fill the gaps left by existing international legal frameworks, providing an independent body to prosecute corruption cases involving MNCs, HNWIs, and state actors. In doing so, it would hold these actors accountable for the economic harm they cause, particularly in developing countries.
By focusing on tax-related corruption and illicit financial flows, the IACC could support the goals of the proposed UN Tax Convention. The court could help enforce international norms around beneficial ownership transparency and public country-by-country reporting. Furthermore, the IACC could serve as a crucial deterrent to corrupt practices, ensuring that those who misuse public funds or evade taxes are brought to justice.
In many cases, corruption in Africa is not due to cultural or systemic differences but rather a byproduct of greed and the exploitation of weak governance structures. An international body like the IACC could help create a level playing field, ensuring that the same rules apply to everyone, whether they are a powerful multinational corporation or a high-net-worth individual with offshore accounts.
It is safe to say the interconnected problems of tax evasion, illicit financial flows, and corruption require a bold, coordinated international response. The proposed UN Tax Convention, combined with the establishment of an International Anti-Corruption Court, could represent a significant step forward in addressing these issues. By providing a global framework for fiscal justice and holding corrupt actors accountable, these initiatives could help nations, particularly in Africa, recover the billions lost annually to corruption and illicit financial flows. It’s time to recognise that tackling corruption on a global scale is not just a moral imperative — it’s an economic necessity.
Prosper S Maguchu is an assistant professor of law specialising in financial crimes and international asset recovery from a human rights based approach.