3 May 2016: The May 2016 issue of the UN Conference on Trade and Development (UNCTAD) Global Investment Trends Monitor Report discusses recent developments in offshore financial hubs, stressing the need for greater coordination between tax affairs and international investment policy. The report says these two areas must be mutually reinforcing in order to build an enabling environment for investment, secure financing for development targets, and support the integration of developing countries in the global economy.

The report notes that changes to national policies have led to a decline in investment flows to offshore financial centers. Luxembourg, for example, which is a principal destination for offshore investment flows, enacted changes to its tax framework, to reduce abuse of tax benefits.

The Monitor also flags a change in the origin of investment flows. While the US and other developed countries traditionally have been dominant origin countries, investment flows from developing and transition economies are playing an increasing role. The Monitor notes that, between 2010 and 2014, Hong Kong (China), the Russian Federation, China and Brazil accounted for 65% of investment flows to the largest Caribbean financial centers.

The Monitor says a key concern for policymakers is a “disconnect” between productive investments and income generation by multinational enterprises (MNE), and the related implications for sustainable development in developing economies.

The Monitor stresses that despite efforts like the Base Erosion and Profit Shifting (BEPS) initiative, launched in 2013 by the Group of 20 (G20) and Organisation for Economic Co-operation and Development (OECD), better coordination is needed between international tax and investment policy, in light of recent revelations that offshore centers and jurisdictions have been used to evade or avoid taxes. [UNCTAD Global Investment Trends Monitor] [Publication: UNCTAD 2015 World Investment Report]