Picture: SUPPLIED
Picture: SUPPLIED

Frankfurt —   The United Arab Emirates (UAE), a magnet for the world's wealthy, has emerged as one of the fastest-growing corporate tax havens, according to a study released on Tuesday that highlighted $200bn-plus flowing into the country.

The index by the Tax Justice Network, which documents countries that attract companies to shrink their tax bills, added the UAE to its top-10 ranking, which includes Switzerland and Bermuda.

Britain's offshore territories the British Virgin Islands (BVI), the Cayman Islands and Bermuda were named as the most significant jurisdictions used by companies to minimise their tax, followed by the Netherlands.

The UAE joined the top ranking at number 10 after multinationals rerouted more than $218bn of foreign direct investment via the Netherlands to the UAE to save taxes, the study said, bolstering financial activity by almost 180%.

A Dutch finance ministry spokesperson said it had introduced a withholding tax to target flows of money to low-tax countries, including the UAE and Bermuda, and to prevent the Netherlands being used as a conduit. It estimates, however, that the money flows are lower.

The UAE did not respond to a request for comment.

The Tax Justice Network, a group funded by donations and campaigning for transparency, said its study measured multinational activity, as well as tax rates and loopholes. While companies are not forbidden from using loopholes, the practice is viewed critically.

“You don't need to be a tax expert to see why a global tax system programmed by a club of rich tax havens is haemorrhaging over $245bn in lost corporate tax a year,” said Tax Justice Network CEO Alex Cobham.

Dubai was hit hard by the pandemic as lockdowns hurt tourism and shopping while lower oil prices weighed on the Gulf state's revenues.

To counter the decline in local population and revive a struggling property market, after job cuts prompted many expatriates, who make up the majority of the population, to leave, it redoubled efforts to boost the economy.

The government loosened rules to encourage international companies to establish a local foothold and bolstered schemes offering visas to rich foreigners.

The country has been criticised by the Financial Action Task Force, the global body established to combat money-laundering. The UAE recently approved the creation of a new government office to tackle money-laundering and terrorist financing.

The Cayman Islands government said it “supports a fair tax system” and was committed to “international tax standards”.

Britain's finance ministry said overseas territories set their own policy. Other countries either did not respond or declined to comment.

Reuters

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