FRANKFURT (Reuters) – The United Arab Emirates, a magnet for the world’s ultra-rich, have also become one of the am most, according to a study published Tuesday that highlighted more than $ 200 billion in inflows into the country fastest growing corporate tax haven.
FILE PHOTO: People swim in a swimming pool at Atlantis The Palm Hotel as the Emirates reopen to tourism amid coronavirus disease (COVID-19) on July 7, 2020 in Dubai, United Arab Emirates. REUTERS / Ahmed Jadallah
The index of the Tax Justice Network, which documents countries that induce companies to reduce their tax burdens, has added the United Arab Emirates to its top 10 ranking, which also includes Switzerland and Bermuda.
The British Virgin Islands (BVI), Cayman Islands and Bermuda offshore areas were named as the main jurisdictions used by companies to minimize their taxes, followed by the Netherlands.
The United Arab Emirates ranked 10th after multinational corporations diverted over $ 218 billion of FDI into the UAE via the Netherlands to save taxes. This boosted financial activity by almost 180%.
A spokeswoman for the Dutch Ministry of Finance said she introduced a withholding tax to direct money flows to low-tax countries like the United Arab Emirates and Bermuda and prevent the Netherlands from being used as a canal. However, it is estimated that the money flows are less.
The UAE did not respond to a request for comment.
The Tax Justice Network, a group funded through donations and campaigns for transparency, said its study measured multinational activity as well as tax rates and gaps. While companies are not prohibited from exploiting loopholes, the practice is viewed critically.
“You don’t have to be a tax professional to see why a global tax system programmed by a club of rich tax havens is generating more than $ 245 billion in corporate tax lost annually,” said Alex Cobham, executive director of Tax Justice Network.
Dubai, a party capital in the United Arab Emirates and a magnet for social media influencers, was hit hard by the pandemic as lockdowns affected tourism and shopping, while lower oil prices weighed on the Gulf state’s revenues.
To counter the decline in the local population and revitalize a difficult real estate market, many expatriates, who make up the majority of the population, have left after the job cuts to stimulate the economy.
The government relaxed rules to encourage international companies to gain a foothold locally and strengthened systems that offer visas to wealthy foreigners.
The country has been criticized by the Financial Action Task Force, the global dirty money watchdog. The UAE recently approved the creation of a new government office to combat money laundering and terrorist financing.
The Cayman Islands government said it supports “a fair tax system” and is committed to “international tax standards”. The UK Treasury said the overseas territories had their own policies. Other countries either did not respond or declined to comment.
Additional coverage from Davide Barbuscia in Dubai; Adaptation by David Evans