In this letter, adressed to the World Bank's International Finance Corporation (IFC), EU civil soceity organizations criticise the World Bank policy as intransparent and insufficient to effectivly tackle tax heavens.
A meaningful policy review would result in a policy that ensures that IFC-supported projects are not based in jurisdictions where no meaningful economic activities by its clients take place. Therefore, the IFC needs to take into account the following recommendations:
- The IFC should promote developing countries’ right to mobilise domestic resources and fully endorse Article 7 of the UN Model Convention dealing with business profits, which allows for taxation of certain profits in the source country instead of the residence country.
- The IFC should move beyond the existing OECD Global Forum process and take concrete steps towards an alternative approach which focuses on enhanced transparency about the users of tax havens and not only on states requesting information. Therefore, the IFC must Pressure financial intermediaries and multinational companies to provide relevant and necessary information about their identity, beneficial ownership, activities, economic performance and taxes paid in each country.
- The IFC needs to require implementation of country-by-country reporting requirements by all companies it engages with to ensure that companies follow domestic rules and are in no way involved in transfer pricing practices which result in a misallocation of profit out of the relevant jurisdictions.