• Home
  • News
    • People moves
    • Africa
    • Asia
    • Australia
    • Canada
    • Caribbean
    • Domicile
    • Europe
    • Latin America
    • North America
    • Middle East
    • US
    • US
    • UK
  • Products
    • Funds
    • Pensions
    • Platforms
    • Insurance
    • Investments
    • Private Banking
    • Citizenship
    • Taxation
  • Fintech
  • Regulation
  • ESG
  • Expats
  • In Depth
  • Special Reports
  • Directory
  • Video
  • Advertise with us
  • Directory
  • Events
  • European Fund Selector
  • Newsletters
  • Follow us
    • Twitter
    • LinkedIn
    • Newsletters
  • Advertise with us
  • Directory
  • Events
    • Upcoming events
      event logo
      International Investment Nordic Forum 2021

      International Investment is delighted to announce the 2021 International Investment Nordic Forum which will take place on Tuesday March 9, at 9am (GMT). This curated virtual event will be broadcast live and will feature a series of fund manager interviews and presentations, as well as interviews with some of the Nordic regions top fund selectors.

      • Date: 09 Mar 2021
      • ONLINE, ONLINE
      View all events
  • European Fund Selector
International Investment
International Investment

Sponsored by

Sharing Alpha
  • Home
  • News
  • Products
  • Fintech
  • Regulation
  • ESG
  • Expats
  • In Depth
  • Special Reports
  • Video
  • Taxation

Tax avoidance drives nearly 40% of global FDI: IMF

Tax avoidance drives nearly 40% of global FDI: IMF
  • Pedro Gonçalves
  • @PeterHSG
  • 11 September 2019
  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  

Nearly 40% of worldwide foreign direct investment (FDI), amounting to $15trn, "passes through empty corporate shells" with "no real business activities", a study by the IMF and the University of Copenhagen reveals.

According to the report, ten economies including Luxembourg, the Netherlands, Hong Kong, BVI, Switzerland, Singapore, Ireland, the Cayman Islands and Mauritius host more than 85% of those $15trn phantom investments.

Related articles

  • Mauritius: Sunny Indian Ocean island bets on future as Africa launchpad
  • Germany issues arrest warrants for founders of Panama Papers firm
  • EU to roll out sanctions against blacklisted jurisdictions
  • Tax information sharing causes 25% drop in IFC bank deposits: OECD

Luxembourg's roughly $4trn in phantom FDI inflows alone are equivalent to annual direct investment in the U.S., according to the report.

Even if the empty corporate shells have no or few employees in the host economy and do not pay corporate taxes, they still contribute to the local economy"

"Even if the empty corporate shells have no or few employees in the host economy and do not pay corporate taxes, they still contribute to the local economy" by using local financial services and paying fees, write the authors Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen.

"Phantom" FDI is channeled through shell companies known as special-purpose entities that have no real business activities, according to the report.

Such flows grew by roughly half over the five years to 2017, rising to 38% of total FDI from about 31% in 2010, the study finds. To put it in perspective, phantom capital in 2017 was equivalent of the combined GDP of China and Germany in that year.

The findings come at a time when governments are trying to clamp down on multinational corporate tax avoidance.

The Organization for Economic Cooperation and Development is drafting new international rules to block tax avoidance, but some countries are taking their own initiative. The UK will impose a digital tax on technology companies like Google, Amazon.com and Facebook next year.

"No matter which road policymakers choose, one fact remains clear: international cooperation is the key to dealing with taxation in today's globalized economic environment," write the authors of the IMF report.

 

Subscribe to International Investment's free, twice-daily, newsletter 

  • Tweet  
  • Facebook  
  • LinkedIn  
  • Send to  
  • Topics
  • Taxation
  • IMF
  • Luxembourg
  • Netherlands
  • Hong Kong
  • BVI
  • Switzerland
  • Singapore
  • Ireland
  • Cayman Islands
  • Mauritius

More on Taxation

Comment: The pandemic has dramatically complicated issues of tax residency

  • Comment
  • 15 February 2021
Report proposes 5% UK wealth tax to offset pandemic costs

  • Taxation
  • 09 December 2020
Britons in France warned of steep capital gains tax rises when selling property

  • Taxation
  • 07 December 2020
HMRC payments to tax evasion whistleblowers up 63%

  • Taxation
  • 04 December 2020
OECD to issue international crypto tax evasion standards next year

  • Cryptocurrencies
  • 04 December 2020
Back to Top

Most read

Jersey regulator fines three firms for breaching money laundering rules
Jersey regulator fines three firms for breaching money laundering rules
RL360 parent IFGL in top level management restructure
RL360 parent IFGL in top level management restructure
HSBC Singapore CEO to leave for Saudi British Bank
HSBC Singapore CEO to leave for Saudi British Bank
Emerging markets funds 'in the vanguard' of ESG investing over next five years
Emerging markets funds 'in the vanguard' of ESG investing over next five years
Expat exodus in Gulf states could continue into 2023: S&P report
Expat exodus in Gulf states could continue into 2023: S&P report
  • Contact Us
  • Marketing solutions
  • About Incisive Media
  • Terms and conditions
  • Policies
  • Careers
  • Twitter
  • LinkedIn
  • Newsletters

© Incisive Business Media (IP) Limited, Published by Incisive Business Media Limited, New London House, 172 Drury Lane, London WC2B 5QR, registered in England and Wales with company registration numbers 09177174 & 09178013

Digital publisher of the year
Digital publisher of the year 2010, 2013, 2016 & 2017
Loading