Finnfund's investment to Malaysia pass through numerous Luxembourg-based holding companies. The arrangement utilises e.g. Luxemburg advance tax agreements, which have been subject to international criticism. Image: LuxLeaks
 
A new report (in Finnish) published by Finnwatch reveals a complex tax haven arrangement utilised by a fund and its management company, which invest development cooperation funds in Malaysia, Finland and Eastern Europe. The report focuses on the Dasos Timberland Fund I, which is managed by Dasos Capital. Finnfund, which invests Finland's development cooperation funds, is one of the Fund's investors and Dasos Capital's partner. Other investors in the Fund include for example European Investment Bank EIB.

"Financial statements and secret documents submitted to Luxembourg's government, which Finnwatch examined, indicate that the purpose of the tax arrangement is to evade taxes both in Finland and in Malaysia where Finnfund seeks to promote development.

Dasos Capital's aggressive tax planning is based on secret tax agreements concluded with government of Luxembourg, which have been subject to international criticism, the transfer of immaterial capital into Luxemburg, as well as thin capitalization.

"An investment from Finland to Malaysia passes through several Luxembourg-based holding companies. The arrangements are so aggressive at times that there is reason to believe that in some cases these amount to illegal tax evasion," Vartiala says.

The focus point of Finland's development policy is on strengthening the tax base of developing countries. Finland's Development Policy Programme drawn up by the Ministry for Foreign Affairs states that international tax avoidance and tax evasion erode the foundation of national economies.

"The tax arrangements related to the Fund used by Finnfund are problematic for the credibility of Finland's development policy. Warnings issued by NGOs to Finnfund on problems related to its tax responsibility have fallen on deaf ears," Vartiala states.

Finnwatch suspects that the now uncovered aggressive tax planning schemes are only the tip of the iceberg. The disclosure of these problems to the public is made very difficult due to the lack of transparency in Finnfund's activities.

"Finnfund refuses to disclose the content of its investment portfolios or the sums it has invested in different funds. The majority of Finnfund's investments to funds pass through tax havens, and the company does not have credible policies concerning tax responsibility." 

Finnwatch considers investments in the Dasos Capital forest fund strange for other reasons as well. According to law, Finnfund is only permitted to invest in developing countries and Russia. In spite of this, development cooperation funds have been invested via the Dasos Capital-established forest fund primarily in Finland and countries in Eastern Europe.

The report by Finnwatch "Verovälttelyä kehitysyhteistyövaroilla – Finnfund ja metsärahaston verojärjestelyt Luxemburgissa" (Tax avoidance with development cooperation funds - Tax arrangements by Finnfund and Dasos Timberland Fund I in Luxembourg) is available in Finnish here >>

Further information: 
Sonja Vartiala
sonja.vartiala (at) finnwatch.org
+358 44 568 7465