Huge losses have a serious economic impact on the region and contribute to crime, terrorism and security concerns, experts said.
By Tzvetina Borisova and Igor Jovanovic for Southeast European Times in Sofia and Belgrade -- 20/08/13
Experts say consumers ultimately pay the price for tax evasion and corruption that cost Balkan nations billions of euros. [AFP]
Crime, corruption and tax evasion have drained billions of euros from Balkan nations and damaged the quality of life for citizens, prompting two NGOs to initiate a new study of the region's illicit financial outflows.
According to previous research by international think tank Global Financial Integrity (GFI), criminal elements and unpaid taxes drained the Balkans of more than 83.5 billion euros between 2001 and 2010, and contributed to terrorism and security concerns.
Armed with these findings, GFI is partnering with the Adriatic Institute for Public Policy, an anti-corruption watchdog organisation in Croatia, to carry out a joint study on these illicit outflows, which will cover 1991 through 2011.
The groups expect to publish the new report in mid-2014. Clark Gascoigne, GFI communications director, said the study aims "to thoughtfully study the problem [of illicit financial outflows] and calculate the economic toll that it is having on the region. We hope to then pair our rigorous economic research with specific case studies from the region to better analyse the problem. Beyond that, we hope to provide policy recommendations that can be taken by local, regional, and international policymakers to curtail the illicit flows."
Gascoigne said GFI's latest illicit outflow data for the Balkans does not include Greece, Kosovo and Slovenia, which will be included in the forthcoming study.
"The large amount of illicit money flowing out of the Balkans region, and the fact that it is increasing, are two of the main things that interested us in doing a more thorough study," Gascoigne said.
GFI's research suggests that illicit financial outflows between 2001 and 2010 were largest in Serbia -- 38.47 billion euros, or 112 percent of the country's GDP in 2011.
Zlatko Minic of Transparency Serbia said the country had a good legal framework for combating crime, corruption and tax evasion, but added that the laws are not being implemented consistently.
"It seems as though there is not enough political will to apply what has been passed in laws. For example, Serbia has had the legal grounds to investigate the origin of citizens' property and revenues since 2002, but that is not being done for reasons that are unclear," Minic told SETimes.
As part of efforts to curb the drain of money into the so-called grey zone, this year authorities in Belgrade implemented cross-checks of people possessing property worth more than 350,000 euros to compare what they declared on their tax statements to their actual holdings. All violators were then obliged to pay a tax rate of 20 percent -- much higher than the regular property rates in Serbia.
"This measure was established so that we can finally initiate the process of introducing tax discipline," said Milica Bisic, adviser at the ministry of finance and economy.
Zlata Djordjevic, a member of Serbia's Anti-Corruption Agency Council, said this measure alone is not enough.
"The examination of property certainly introduces tax discipline, but a law also needs to be adopted that will enable the confiscation of property for which individuals cannot prove how they acquired it," Djordjevic told SETimes, stressing that a strike on property is the most severe penalty for those who obtained it through illegal activities.
Natasa Srdoc, chair of the Adriatic Institute, said the methods of illicit financial outflows and of amassing huge amounts of illicit wealth by corrupt government officials and their partners is common in all Balkan countries.
"It is a known fact that corrupt government officials are blocking investigations through the political influence on the judiciary," she told SETimes. Meanwhile, "the significant theft of Balkan treasuries robs individual citizens of vital resources needed in the healthcare arena, especially for the working poor and retirees, pensions reduced for retirees who are now forced to live in abject poverty, lack of funds for education for a new generation and inadequate infrastructure."
Gascoigne added that the outflow of illicit money from the Balkans drains currency reserves, reduces tax collection, curtails investment, heightens inflation and reduces free trade.
"It has its most serious impact on the poor, as funds shift abroad and are lost to investment or consumption in such countries," Gascoigne said.
Srdoc said some of the solutions for the region include establishing independent judiciary and the rule of law, transparent and accountable governments, maintaining full transparency of government transactions and eliminating opportunities of abuse of office.
She said it is necessary "that we know at all times real names behind any ownership of assets, companies and bank accounts, confiscation of illicit enrichment amassed by corrupt government officials and their partners in crime."
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