Washington: The vast majority of companies that received money from the World Bank’s private lending arm last year to finance investment in Africa’s poorest region use tax havens, a campaign group has said.
A total of 51 out of 68 companies that receive such funds from the International Finance Corporation for sub-Saharan Africa used tax havens.
And they accounted for 84 per cent of IFC investment in the region in 2015, Oxfam said in a report yesterday.
The use of the havens had no apparent link to the companies’ core business, it added.
The most common haven for these companies was Mauritius, Oxfam said, adding that 40 per cent of the IFC’s customers investing in sub-Saharan Africa had ties there.
The report said the Indian Ocean island nation is known to accommodate “round-tripping”, a practice in which a company sends money offshore before returning it under the guise of foreign direct investment. That earns tax breaks and other financial incentives.
The Oxfam report comes in the wake of the Panama Papers leak about how wealthy individuals and firms use tax havens to hide assets and avoid paying taxes.
“It doesn’t make sense for the World Bank Group to spend money encouraging companies to invest in ‘development’ while turning a blind eye to the fact that these companies could be cheating poor countries out of tax revenues that are needed to fight poverty and inequality,” said Oxfam’s tax policy advisor, Susana Ruiz.
The Oxfam report said the IFC has more than doubled its investment in companies that use tax havens in five years.
It has risen from USD 1.20 billion in 2010 to USD 2.87 billion in 2015, the study said.