Fifty-one of the 68 companies that were lent money by the World Bank’s private lending arm in 2015 to finance investments in sub-Saharan Africa use tax havens, Oxfam revealed today.
Oxfam’s analysis focused on the International Finance Corporation’s (IFC) investments in Sub-Saharan Africa. It shows that together, these 51 companies, whose use of tax havens has no apparent link with their core business, received 84 per cent of IFC investments in that region in 2015.
It also reveals that the IFC – the World Bank’s private sector arm – has more than doubled its investments in companies that use tax havens in just 5 years – from $1.59 billion (US $1.20 billion) in 2010 to $3.81 billion (US $2.87 billion) in 2015.
The findings come ahead of the IMF-World Bank Spring meetings in Washington DC on 13-15 April and in the wake of the Panama Papers scandal, which revealed how powerful individuals and companies are using tax havens to hide wealth and dodge taxes.
Oxfam Australia’s Chief Executive Dr Helen Szoke said this was yet more evidence of a broken international tax system, and the Australian Government must use its influence as a donor of the World Bank to insist on tougher standards and safeguards.
“At a time when the Australian Government is also increasing its engagement with the private sector through the Australian aid program, the government’s focus must be on responsible investment and sustainable development,” Dr Szoke said.
She said that in Oxfam’s study, the most popular haven for IFC’s corporate clients was Mauritius; 40% of IFC’s clients investing in Sub-Saharan Africa had links there.
Mauritius is known to facilitate “round-tripping”. This is where a company shifts money offshore before returning it disguised as foreign direct investment, which attracts tax breaks and other financial incentives.
Sub-Saharan Africa is the poorest region in the world. It desperately needs corporate tax revenues to invest in public services and infrastructure.
“The region lacks money to provide enough skilled birth attendants, clean water or mosquito nets, for example, resulting in high rates of child mortality; one child in 12 dies before their fifth birthday,” Dr Szoke said.
”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.
“The World Bank Group should not risk funding companies that are dodging taxes in Sub-Saharan Africa and across the globe. It must put safeguards in place to ensure that its clients can prove they are paying their fair share of tax.
“In the wake of this mounting evidence, the Australian Government must act now. It should pressure the World Bank to tighten its safeguards in relation to the use of tax havens – and Australia could legislate to crack down on multinationals transferring funds to tax havens from our own shores.”
A copy of the report can be found here.
For further information please contact Bianca Wordley on 0407 799 365 or biancaw@oxfam.org.au
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