In 2023, the German Development Bank (DEG) will continue to be active in offshore financial centres (OFC) with 179 out of 338 investments (53 per cent) - primarily in the Cayman Islands and Mauritius. These are the findings of the latest study by the Netzwerk Steuergerechtigkeit (Tax Justice Network). For the first time, it uses concrete examples to show how tax revenues are lost in countries of the Global South as a result. Although the overall damage identified in the study is comparatively low, it clearly shows that DEG's business relationships legitimise structures that cause major damage in partner countries through illegitimate financial flows.
"Through low taxes and anonymous structures, offshore financial centres ensure that some of the money urgently needed for sustainable development ends up in the pockets of the global financial elite. This contradicts the German government's development and sustainability policy goals," comments Christoph Trautvetter, author of the study and coordinator of the Tax Justice Network.
The study also takes a closer look at DEG's lack of transparency regarding key investment-related information in offshore financial centres. DEG's offshore investments are primarily private equity funds through which DEG indirectly invests in companies in its target countries. Investment-related information from DEG and the respective funds can only be found publicly for one in four of these companies.
"The highly aggregated data that DEG publishes annually in its 'Development Policy Report' does not allow sufficient conclusions to be drawn about the development and sustainability impact of its investments. The German government must finally admit that there is a transparency deficit at DEG and ensure that the Bundestag and the public can get a comprehensive picture of Germany's commitment to sustainable development," comments Klaus Schilder, Misereor expert on development financing, on the results of the study co-financed by Misereor.
Roman Herre, agricultural advisor at FIAN, also takes a critical view of DEG's investment policy: "With its investments via financial shadow centres, DEG is behaving like a private bank. The fact that it does not even publish its criteria for investments in investment funds and does not disclose the methodology of its development policy impact assessment is unacceptable. This does not do justice to a bank with a public and development policy mandate. The impact presented in its 'Development Policy Report' is therefore a black box with little informative value for the public."
Further information:
The study "Sustainable development via offshore financial centres? An analysis of DEG's offshore activities and the tax consequences" is available here available here.
Further contact:
Christoph Trautvetter, Tel.: 030 21 799 994, Mail: c.trautvetter@netzwerk-steuergerechtigkeit.de
