Thursday, October 30, 2008

Why has the World Bank not come up with figures on illicit flows?

Perhaps one answer to the question in our headline is that the World Bank is embarrassed that it finances tax evasion- and corruption-systems in Lebanon and other secrecy jurisdictions.

The Task Force on Illicit Flows -- which, to be honest, the World Bank only agreed to join up to after Norway forced their hand -- met last week in Oslo for its final meeting (Richard Murphy has more here.) Within this framework, the World Bank was commissioned by Norway to carry out research on illicit financial flows. At the time, the idea was welcomed by the World Bank's President, Robert Zoellick, who said "a study of the development impact of off-shore financial centers would be a valuable contribution to the governance and anti-corruption agenda."

However, as the Task Force met for the last time last week, it now turns out that the Bank will not deliver what Zoellick promised. How come?

Perhaps it is because the anti-corruption and transparency agenda is not followed consistently by all World Bank departments. There is new evidence showing that the Bank financed information technology for a commercial register in Lebanon which in turn is used for managing and merchandising corruption- and tax evasion-vehicles. Take a look at what follows.

Lebanon offers a certain type of “Offshore Company” which is barred from engaging in domestic activity. Click here. This company is tax exempt. Furthermore, there is no sign whatsoever that the commercial register of Lebanon is publicly available online. It is rather confidential, it seems. The World Bank, through its funding of the registry’s development, (we can't find the matching link on the World Bank's site, though it wouldn't necessarily be there) supported the commercialization of these companies and allowed that these “Offshore Companies” can be registered in a “special registry at the Commercial Registry”. Why, if not for secrecy reasons, would one even consider let alone institute a ‘special registry’ for offshore companies in a (usually public) commercial registry?

It was precisely such “offshore companies” that the OECD categorised as constituting harmful preferential tax regimes or “tax havens” in its 1998 report. In conjunction with the banking secrecy laws in Lebanon it would be interesting how such “special” corporate registries and the abusive behaviour they facilitate fit in the World Bank's overall “governance and anti-corruption agenda”.

This demonstrates a lack of coherence. And that’s why one or both of the following has to go: either the buzzwords of “governance and anti-corruption agenda” or the tacit complacency in tolerating and even promoting corporate tax looting from poor countries through secretive and unaccountable corporate veils. The World Bank needs to decide quickly which option it wants to follow. The spirit of Doha demands it.

(written by a guest blogger, who prefers to remain anonymous.)


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