The World Bank has been accused of funding potential tax cheats in Africa through its private lending arm, the International Finance Corporation.
A British non-profit, Oxfam claims the global lender funded 75 per cent of companies with presence in tax havens in 2015, calling on World Bank to ensure proof of tax compliance before funding.
“Oxfam analysis reveals that 51 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,” says the report.
“Together these companies, whose use of tax havens has no apparent link to their core business, received 84 per cent of the International Finance Corporation’s investments in the region last year.”
The report comes in the wake of the Panama Papers scandal, which reveals how powerful individuals and companies are using tax havens to hide wealth and dodge taxes.
Oxfam’s analysis focused on IFC’s investments in sub-Saharan Africa revealing that the unit has more than doubled its investments in companies that use tax havens in just five years — from $1.20 billion in 2010 to $2.87 billion in 2015.
Mauritius was once again singled out as the most popular haven for IFC’s corporate clients with 40 per cent of firms lent cash by the World Bank sub-Saharan Africa having links there.
Mauritius is also 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.
The small Island allows companies to reap the reward of tax benefits only available to foreign investment. The money is subject to tax breaks rather than capital gains and income tax that should rightly be charged on domestic investment.
As an example, 34 per cent of total investment to India from 2000 to 2015 has come from the small island of Mauritius, most of it from the same building in Port Louis, the capital.
According to a recent UN report, tax evasion costs poor countries about $100 billion in lost revenues.