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Companies put $221 bln into low-tax jurisdictions in 2015 -U.N

GENEVA (Reuters) – Companies put $221 billion into countries with low tax last year, chiefly Luxembourg and the Netherlands, while $72 billion of investment went into two British tax havens – the British Virgin Islands and Cayman Islands, the U.N. said on Tuesday.

However, they took billions out of Luxembourg and the Netherlands in the final quarter of 2015 after the two countries imposed new EU rules to crack down on abusive tax practices.

The flows into the British Virgin Islands and the Caymans were roughly in line with historical averages but their source has shifted from rich to developing countries in recent years, the U.N. thinktank UNCTAD’s report said.

From 2010 to 2014, Hong Kong, the United States, Russia and China were the top four sources.

British Prime Minister David Cameron has come under increasing pressure in the last few months to tackle tax evasion after leaked documents from a Panamanian law company exposed how the world’s rich and powerful used secretive offshore company structures to stash their wealth.

Companies shuffling money between jurisdictions to save on tax remained “a key concern for policy makers”, the U.N. report said, noting that firms from a sample of 26 developed countries registered more profits in Bermuda than in China in 2014.

The report said companies’ “special purpose entities” (SPEs) were typically subsidiaries that had little connection to the local economy but held assets or liabilities or raised capital.

Quarterly flows to the SPEs in the Netherlands reached $148 billion in the third quarter, the highest since 2007, driven by investment from Luxembourg and Britain, but then sharply reversed.

Flows to Luxembourg, associated with funds financing investments in the United States, surged in the first three quarters of 2015, triple on the same months of 2014, but turned negative with a net divestment of $115 billion in the final quarter.

“The tight interrelation between SPE flows in Luxembourg and the Netherlands highlights the existence of dense and complex networks of these entities in both countries, with capital flowing rapidly among them in response to financing needs and tax planning considerations,” the report said.

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