Foreign Direct Investment (FDI) from the global tax havens to Bangladesh has been increasing over the years.
Bangladesh Bank statistics unveil that FDI from six tax havens increased by four times in the last six years.
The six tax havens are: Bermuda, British Virgin Island, Cayman Island, Mauritius, Panama and Seychelles. Total FDI from these islands and territories stood at $76 million in 2015 from $17 million in 2010.
More than half of these FDI, however, in the last year came from British Virgin Island.
As net inflow of FDI stood at $ 2232 million ($2.23 billion) in the last year, ratio of FDI from tax haven stood at 3.40 per cent of total inflow of FDI.
Tax havens are mostly small islands and few developed and developing countries where people and corporate can safely park their tax evaded incomes and assets.
These places offer low or zero tax for parking or investing the money without any question and facilitate reinvest or reroute the stashed assets to origin and other countries.
"The FDI from tax havens may be a double whammy for Bangladesh," said Professor Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD). "Firstly, it is very likely that these are part of the money stashed from the country by dodging taxes. Secondly, some of the stashed money again entering into the country as foreign investments to take advantage of tax and other incentives."
According to Global Financial Integrity (GFI), a Washington-based organisation, illicit financial flows (IFF) from Bangladesh stood at $9.66 billion (Tk 740 billion) in 2013.
It also showed that in the last 10 years (2004-2013), dirty or black money worth $55.87 billion flown out from the country to avoid taxes.
The economist, however, added that forensic investigation is required to detect the origin of such FDI.
"Available data is not sufficient to say whether it is round tripping or not," he added.
Round-tripping is a money laundering technique. If a Bangladeshi businessman secretly transfers his illegal income or financial asset to the tax haven and then brings back as FDI to whiten it, it is considered as round tripping.
"After the Panama Papers leak, it is important to examine such inflow of FDI," he added. "Even tax dodged money from other country may come into Bangladesh through any tax haven to avail benefits for the foreign investment."
Official statistics do not fully reveal in which sectors the money are invested. Partial statistics, however, indicate that a good amount of FDI came to textile sector. For instance, FDI from British Virgin Island and Mauritius stood at $35.31 million and 13.69 million respectively in the textile and wearing sector.
The CPD chief also suggested to right application of transfer pricing rules to detect capital flight from the country and check rerouting of capital flows.
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