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84% of World Bank's private investments in Sub-Saharan Africa go to companies using tax havens

11th Apr 2016

Fifty-one 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, Oxfam revealed today.

Oxfam's new analysis focused on International Finance Corporation's (IFC) investments in Sub-Saharan Africa. It shows that together these 51 companies, whose use of tax havens has no apparent link with their core business, received 84 percent of IFC investments in that region in 2015. It also reveals that the IFC has more than doubled its investments in companies that use tax havens in just five years - from $1.2billion in 2010 to $2.87billion in 2015. 

The findings come ahead of the annual IMF-World Bank Spring meetings starting on Wednesday in Washington DC, and in the wake of the Panama Papers scandal which revealed how powerful individuals and companies are using tax havens to hide wealth and dodge taxes. The issue of tax havens is also expected to be high on the agenda at the UK government's Anti-Corruption Summit in London next month. 

In Oxfam's study, the most popular haven for IFC's corporate clients was Mauritius; 40 percent of IFC's clients investing in Sub-Saharan Africa have links there. Mauritius is 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. 

Sub-Saharan Africa is the poorest region in the world. It desperately needs corporate tax revenues to invest in public services and infrastructure. For example, the region lacks money to provide enough skilled birth attendants, clean water or mosquito nets, resulting in high rates of child mortality; one child in 12 dies before their fifth birthday.

Oxfam's Head of Inequality, Nick Bryer, said: "It's crazy to be giving with one hand and taking away with another - the UK government donates to the World Bank to encourage development, but by allowing investments in tax havens the World Bank's lending arm is ultimately depriving poor countries of much-needed revenues to fight poverty and inequality." 

"The World Bank Group should not risk funding companies that are dodging taxes in Sub-Saharan Africa and across the globe. It needs to put safeguards in place to ensure that its clients can prove they are paying their fair share of tax." 

The IFC invested more than $86billion of public money in developing countries between 2010 and 2015; 18.6 percent of it spent in Sub-Saharan Africa. The IFC has a significant focus on financial markets, infrastructure, agribusiness and forestry, among other sectors. 

While the IFC arguably leads the private sector with its disclosure, environmental and social standards, the public still has no access to information about where over half of the institution's financing ends up, because it is done through opaque financial intermediaries. It also continues to face major challenges in measuring its overall development impact, and ensuring that the projects it funds do not harm local communities. This latest Oxfam research shows that the organisation also has a long way to go in ensuring that its clients are responsible tax payers.

Oxfam is calling for the IFC to develop new standards to ensure it only invests in companies that have responsible corporate tax practices. For example, companies should be transparent about their economic activities so it is clear if they are paying their fair share of tax where they do business. 

The international agency is also calling on David Cameron to show strong leadership in tackling tax havens, beginning by intervening to ensure that the UK's Overseas Territories and Crown Dependencies publish public registers revealing the true owners of companies based there, ahead of the Anti-Corruption Summit in May. 

Oxfam is urging the World Bank and IMF to work with governments around the world to further reform the international tax system and help prevent tax dodging by wealthy individuals and companies, including action to end the era of tax havens. Tax dodging using tax havens is estimated to cost poor countries $100billion in lost revenues every year.

ENDS

Oxfam spokespeople available for interview. Please contact Melanie Kramers, mkramers1@oxfam.org.uk +44 (0)7825 088894

Notes to editors

Oxfam's new report 'The International Finance Corporation and Tax Havens' covers IFC investments in Sub-Saharan Africa between January 2010 and October 2015 (the latest data available). The IFC, a member of the World Bank Group, is "the largest global development institution focused exclusively on the private sector in developing countries."

Oxfam is calling on the UK Government to take five urgent actions to show its commitment to ending the abuse of tax havens following the Panama Papers leak.