'Going Offshore' - Win/Win For Transnationals

The UK’s public institution responsible for financing projects in developing countries has been channelling millions of pounds through companies that use tax havens.

A new report, ‘Going Offshore’, has found that as of the end of 2013, a massive 118 out of 157 fund investments made by the CDC Group Plc – the UK’s DFI (Development Finance Institution) – went through jurisdictions that feature in the top 20 of Tax Justice Network’s Financial Secrecy Index (FSI).

Between 2000 and 2013, these funds received a total of $3.8 billion (£2.4 billion), while 26 funds were registered in the Cayman Islands ($909 million) (£564 million).

Report author Mathieu Vervynckt, Policy Analyst at the European Network on Debt and Development (Eurodad), said: “Developing countries lose hundreds of billions of pounds every year through tax avoidance and evasion by transnational companies. It therefore seems very contradictory for The UK’s DFI - whose mandate should be to promote development and end poverty – to route so much support through tax havens that maintain these practices. This is essentially providing income and legitimacy to the offshore industry.”

CDC is one of 14 European DFIs and three multilateral DFIs that are examined within the report. It finds that most DFIs are using tax havens. Institutions that continue to route funds in this way includes international standard-setter the IFC – the World Bank’s lending arm.

The report also found that:

• Of the 21 funds registered in the United Kingdom, 15 are domiciled in the City of London through CDC’s largest spin-off, Actis. Between 2000 and 2013, these 15 funds received $2.3 billion (£1.4) in original CDC commitments.
• Six of the 19 direct investments ($194m/ £120m) have a routing pattern through Mauritius.
• In 2013, the CDC invested in nine funds, of which six were structured through major secrecy jurisdictions: two were domiciled in Mauritius, two in Singapore, one in Guernsey and one in Luxembourg. These six funds received a total of $553 (£343million).
• In 2013 more than 88% of CDC’s total portfolio was committed to the financial sector, accounting for more than $5 billion (£3.1bn).

Mathieu Vervynckt added: “We are urging CDC and its fellow DFIs to stop supporting companies that use tax havens and make sure that details of all operations are open to the public. After all, DFIs are public institutions with a development mandate, so it’s only right to demand that they should be accountable to the taxpayers that pay for them and the people in the developing countries that they are supposed to help.”


A full copy of Eurodad’s report: Going Offshore – How development finance institutions support companies using the world's most secretive financial centres can be downloaded from 4th November at: www.eurodad.org/goingoffshore


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