On 9th September, Business Insider reported that roughly 40% of foreign direct investment is “phantom capital” being used to avoid or pay lower corporate taxes, according to a new study by the IMF and University of Copenhagen. It is about $15 trillion globally — or roughly the size of annual gross domestic product for China and Germany combined, the study showed, with a growth rate is faster than global GDP. Whilst “real” FDI can be beneficial, phantom FDI — or investments that pass through empty corporate shells that don’t do any real business — is “financial and tax engineering,” blurs statistics, and makes it difficult to understand the true economic integration, the study said. Luxembourg, the Netherlands, Hong Kong, BVI, Bermuda, Singapore, the Cayman Islands, Switzerland, Ireland, and Mauritius account for more than 85% of phantom FDI. It says that some countries attract phantom FDI, even luring foreign investment by offering benefits like low or no corporate tax rates.
The report is at –
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