The British Virgin Islands got more foreign direct investment last year than the major emerging economies of India and Brazil combined, a United Nations survey said on Tuesday.
The Caribbean archipelago, a tax haven otherwise dependent on tourism, has jumped up the league table of top investment destinations in the past five years. It welcomed $92 billion of foreign cash in 2013, according to preliminary figures compiled by the U.N. trade and economy thinktank UNCTAD.
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That was the fourth biggest haul of investment globally. The world's biggest economy, United States, attracted $159 billion.
China, the world's second biggest economy, got $127 billion, while major oil and metals producer Russia took in just $2 billion more than the British Virgin Islands.
Brazil and India were further down the ranking, with $63 billion and $28 billion respectively.
For most countries, foreign direct investment mainly consists of companies spending on crossborder corporate acquisitions and new overseas projects.
But for the British Virgin Islands, most of the money is transferred quickly in and out of the country or cash moved through the treasury accounts of large firms, which UNCTAD terms "transnational corporations" or TNCs.
"In the British Virgin Islands there are some financial companies that perform the role of treasuries of the TNCs, as a kind of profit unit or profit centre," said James Zhan, director of UNCTAD's investment and enterprise division.
"The TNCs' revenues basically flow from their foreign affiliates in countries with higher tax rates to there," he told a news briefing.
The islands' annual inflow of foreign investment was 40 percent up from a year ago and continues a trend that took off after the economic crisis struck and governments began cracking down on tax avoidance.
Zhan said the British Virgin Islands' boom in investment would be unlikely to continue at the same pace because regulators were determined to stop such flows.
"In the medium or longer term we see that the role in this respect may reduce," he told a news conference.
"Governments are looking into the situation and trying to tighten up their regulatory framework both at the national and international level."
The main casualty of such regulation was likely to be big companies' treasury flows, he said, adding that UNCTAD was working on a study to show how big the impact would be.
The continued flows to the British Virgin Islands, which UNCTAD has previously referred to as a tax haven, is likely to keep it under the microscope of the Group of 20 leading economies, which has said it wants to put pressure on "non-cooperative jurisdictions".
The G20 has asked the Organization for Economic Co-operation and Development to lead efforts on curbing international tax evasion and avoidance, and the OECD's tax transparency forum has named the British Virgin Islands as one of five countries that failed to meet international standards on tax transparency.
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Each of the five either failed to share taxpayer information with other countries or to gather information on beneficial ownership of corporate entities registered on their territory, or both.
The OECD has said big international companies, banks and agencies may think twice about investing through these jurisdictions.
UNCTAD said the total global flow of foreign direct investment rose by 11 percent to $1.46 trillion in 2013, and UNCTAD forecasts it will increase to $1.6 trillion in 2014 and $1.8 trillion in 2015.