Foreign Direct Investment - Or Tax Scam


A new study by the International Monetary Fund shows that $15 trillion is held in shell companies across the world for tax avoidance purposes, depriving local economies of tax revenue. $15 trillion is 40% of the world’s foreign direct investment (FDI), a term for money transferred across borders between firms belonging to the same parent company. In theory, FDI should enhance and invest in local economies. However, many of these tax-avoidance subsidiaries serve no business purpose, other than to channel earnings into low tax venues (Bermuda, Ireland and Netherlands, for example). Some of the tax avoidance arrangements have even acquired cutesy nicknames: Consider the "Double Irish with a Dutch Sandwich" (below). The arrangement is "legal" - but should it be treated as if it has economic substance?


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