Published on Eurodad, by Nuria Molina, Oct. 21, 2010.
What does the World Bank IFC (International Finance Corporation) say on the use of tax havens?
In October 2009 European NGOs prompted their Executive Directors at the World Bank to request strong action to stop investing in companies that are registered in tax havens. In response to the NGO request, the Executive Board took swift action and issued, on April 2010, a public position on “Off-shore financial centers and tax evasion in World Bank operations.” In this note, the World Bank Group states its commitment to “the integrity and transparency of global financial markets” and expresses concerns on the “the issue of offshore financial centers (OFCs) and about the potential risk of tax abuse and the threat to good governance that they present.”
However, the Bank fails to take concrete measures to ensure that IFC investments stop supporting companies that benefit from the opacity of secrecy jurisdictions to evade taxes owed in poor countries, which contributes to the bleeding of more than $600 billion every year. In fact, the World Bank justifies the use of tax havens by companies the IFC sponsors for “legitimate purposes when partners and sponsors act with integrity. For example, jurisdictions may be used to avoid double taxation of investments in developing countries, or may provide legal infrastructure that a given host country lacks” … //
… Why should the IFC do more?
The IFC is a public institution with a development mandate. The OECD processes, if successful, will hopefully address the problem of lack of transparency and dishonesty of companies worldwide investing in the South. However, this will take time. In the meantime, taxpayers’ money and sovereign guarantees that back IFC investments should not go to companies that make use of jurisdictions that are not sufficiently transparent. Public development institutions such as the IFC should care, first and foremost, about the positive developmental impacts of the investments they make: they should set higher standards of financial integrity and pull companies to the right direction.
The IFC staff think that more data is needed to provide evidence on the impact of the use of tax havens on poor countries. If they are right that more data is needed to justify a stronger IFC policy on the use of tax havens, then they should start collecting data and not waste more time. Until then, the least the IFC should do is put an immediate moratorium on all investments going through tax havens. The burden of proof should be on the companies that hide their information – it should be they that justify their usage of tax havens, instead of NGOs or public institutions having to prove that companies that hide information are doing so to dodge taxes. What else would explain the lack of transparency? (full text).
Link: Praise for IFI crisis response overshadows lack of progress at the Annual Meetings on Eurodad, by Nuria Molina, Oct. 20, 2010.