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Dear Colleague,
You may have already caught this on the front page of the Financial Times this morning, but if not, I'll bring you up to speed.
In our latest issue of F&D, we shine a spotlight on the hidden corners of the global economy. And to that end, one of the articles features new IMF research indicating that in one of those dark corners sits an astonishing $15 trillion in worldwide FDI -- phantom investments that pass through empty corporate shells that have no real business activities -- equivalent to the combined annual GDP of economic powerhouses China and Germany.
"Interestingly, a few well-known tax havens host the vast majority of the world’s phantom FDI. Luxembourg and the Netherlands host nearly half. And when you add Hong Kong SAR, the British Virgin Islands, Bermuda, Singapore, the Cayman Islands, Switzerland, Ireland, and Mauritius to the list, these 10 economies host more than 85 percent of all phantom investments," said researchers Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen.
Some multinationals take advantage of legal loopholes by using innovative tax engineering techniques with creative nicknames like “double Irish with a Dutch sandwich,” which involves transfers of profits between subsidiaries in Ireland and the Netherlands with tax havens in the Caribbean as the typical final destination. These tactics achieve even lower tax rates or avoid taxes altogether.
As always, I'm eager to hear your feedback so please do write me at rkanani@imf.org.
Sincerely,
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 Rahim Kanani Digital Editor, F&D Magazine International Monetary Fund
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