Aid Funding is Being Routed Through Tax Havens

November 5, 2014 Offshore TaxationTax Havens

Development AidBRUSSELS – Aid funding intended for private enterprises in developing country is being moved through offshore tax havens, potentially hindering tax collections in the developing countries it was meant to help.

Government operated aid and development organizations around the world routinely route investments and funds through entities domiciled in offshore jurisdictions, inadvertently supporting and legitimizing tax havens, according to information contained in a new report released on November 4th by the non-government organization European Network on Debt and Development (EURODAD).

The newly published report contains information on the investments made by 14 separate multilateral and 3 bilateral development finance institutions (DFI), which are government supported institutions which provide loans and financing to either private organization in developing countries or to intermediary organizations involved in assisting businesses in developing countries.

According to the experts of EURODAD each of the examined DFIs routed a significant amount of funds through intermediaries located in offshore jurisdictions, with billions of dollars of investment funds being provided to offshore entities before they eventually are invested into developing enterprises.

In the report it was conceded that the DFIs claim that routing funds through offshore intermediaries has a number of legitimate business benefits, such as stability, ease of use, and the avoidance of unnecessary double taxation, however the experts of EURODAD claimed that most of these reasons are unfounded.

EURODAD also claimed that by using tax havens these development agencies are directly depriving developing countries of much needed revenues, while simultaneously lending support to the offshore industry, which, subsequently, further compounds the problems raised by offshore tax evasion and profit shifting.

Photo By: Alex