DanWatch: Escaping Poverty, Or Taxes?

October 31st, 2011

The World Bank’s private-sector entity – the International Finance Corporation (IFC) – seeks to increase tax payments to the government in developing countries through supporting their natural resource projects. This report documents that this aim can be undermined by IFCclients’ tax planning. IFC’s response is that “it is not likely to be true in almost all projects within the extractive industries”.

IFC wants to “create opportunity for people to escape poverty and improve their lives” through private-sector development in poor countries. Oil, gas and mining companies are among those receiving support from IFC. For each project IFC mentioned, the generation of revenues for government in the form of royalties and taxes” are expected as a development outcome. It estimates that authorities in developing countries received 7 billion US dollars from IFC-supported extractives projects in 2009.

This report shed light on the methods IFC’s clients in the extractive sector applied in lowering their tax payment to authorities in the developing countires. A new method is used to categorise and analyse the corporate structure behind each of IFC’s extractive- projects on the basis of tax-planning theory related to foreign direct investments (FDI).

Read the full report here

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