IMF study finds £12trn in global investments are held in off-shore empty corporate shells

Research conducted by the International Monetary Fund (IMF) has found that £12trn is invested globally in empty corporate shells located in tax havens. The report, Piercing the Veil, discovered that almost 40% of all foreign investment positions globally are situated in companies without activity. The IMF has observed how important this is, particularly as in many countries there are major policy initiatives aiming to curb the harmful use of tax havens and, in light of increased digitalization and mobility of assets, the international tax challenge will increase in the coming years.

The eight major countries that are well-known tax havens are the Netherlands, Luxembourg, Hong Kong SAR, the British Virgin Islands, Bermuda, the Cayman Islands, Ireland and Singapore, which hold more than 85% of global investments in special purpose entities. The characteristics of these entities include legal registration subject to national law, ultimate ownership by foreigners, few or no employees, little or no production in the host economy, little or no physical presence, mostly foreign assets and liabilities, and group financing or holding activities as their core business. The IMF has found that this type of financial tax engineering is a worldwide phenomenon that cuts across advanced and emerging market economies.

The IMF suggests that more data is needed to fully pierce the veil of offshore financial secrecy. It believes more countries should regularly report detailed financial data, divided up by instrument, domestic sector, counterpart sector, country, currency and maturity. The IMF also suggests traditional macroeconomic statistics, which are based on the concept of a national economy as the only relevant boundary, should be paired with data on global interconnection that looks across borders to uncover the ultimate holders of financial wealth.

Filed Under: News Analysis

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