Report: Investments for Development: Derailed to Tax Havens
September 28th, 2010
Prepared by RIchard Murphy
Prepared for IBIS, NCA, CRBM, Eurodad, Forum Syd and the Tax Justice Network
The report, entitled ‘Investments for Development: Derailed to Tax Havens: A report on the use of tax havens by Development Finance Institutions,’ looks at a critical area in the development activities of many European countries – the role of the Development Finance Institutions that they own in funding private sector investment in developing countries.
Development Finance Institutions (DFI) invest their capital in developing countries for the express purpose of advancing development in those places by promoting investment in local business. In this respect their activities can be compared to that of the European Investment Bank (EIB) and International Finance Corporation (IFC) – a part of the World Bank. At the end of 2008 the DFIs that were members of the European Development Finance Institutions network (EDFI) had combined funds invested of about €16.7 billion.
However, the business models of the DFIs has been subject to much criticism. Their investments have moved away from those areas normally associated with poverty relief – such as agriculture – and into areas like finance, hotels and telecoms. The DFIs have in many cases ceased to invest directly but do instead invest through funds over which they appear to have little control. And many of their investments are now routed through tax havens – and issue which attracted international attention when Norway banned their fund from investing, at least temporarily, in this way after the report of their Commission on Capital Flight from Developing Countries attacked this practice in their report “Tax Havens and Development”.
The new IBIS report looks at these issues and suggests a new Code of Conduct for Development Finance Institutions to replace the one they have themselves recently proposed.
The Code is robust, and promotes transparency, accountability and a focus on local management of the investment Development Finance Institutions make.