Firms on World Bank projects in Africa use tax havens, stunt growth, Oxfam says

Three out of four companies doing business with World Bank funds in sub-Saharan Africa last year used tax havens, according to a report Monday by the anti-poverty group Oxfam.

The use of tax havens reduced the amount of taxes paid by those companies in countries where they participated on those projects, and that reduced the benefits to those countries of World Bank funds, Oxfam said.

The Oxfam report was based in part on data released last week in the so-called Panama Papers, the largest corporate data leak in history, which exposed how some of the world’s most powerful companies and politicians hide wealth and dodge taxes. The Oxfam report did not name specific companies.

Oxfam urged the World Bank to address the tax haven issue and “responsible corporate tax behavior” at its spring meeting that starts this week in Washington, D.C., and to implement measures to prevent multinational enterprises from using tax havens.

According to Oxfam’s report, 51 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 used tax havens. These companies received 84% of the International Finance Corp.'s investments in the region last year.

Multinational corporations account for a large portion of the tax base in developing countries, contributing to the finance of essential services such as free education and health care, Oxfam said. Complex corporate tax structures that avoid paying taxes, however, reduce the benefit of the international investment by the World Bank.

Oxfam said massive corporate tax evasion is a global issue widely recognized by international organizations, developing countries and civil society, and it affects rich countries as well as poor ones.

“There is a critical misalignment between where large companies declare their profits and where their real business is located,” the report said. “For example, in 2012, U.S. multinationals alone shifted $500 billion-$700 billion, or roughly 25% of their annual profits, mostly to countries where these profits are not taxed, or taxed at very low rates.”

In another recent study, Oxfam found that nine out of 10 of more than 200 multinational companies, including the 100 largest firms in the world, had at least one tax haven.

Since non-international companies cannot use such practices, the tax havens provide an unfair advantage to international companies, and contribute to the concentration of wealth in the hands of a few, the international group said in the report.

“The richest 1% in the world now has more wealth than the rest of the world combined,” Oxfam said. “Power and privilege is being used to skew the economic system to increase the gap between the richest and the rest.”