This paper explores the link between foreign direct investment (FDI) and the BEPS (base erosion and profit shifting) practices of multinationals (MNEs). It puts the spotlight on the outsize role of offshore investment hubs as major players in global corporate investment, a role that is largely due to MNEs' tax planning, although other factors contribute. The paper shows that tax avoidance practices enabled by FDI through offshore hubs are responsible for significant leakage of development financing resources. In policy terms, these findings call for enhanced cooperation and synergies between international tax and investment policymaking.

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Tax revenues from multinational enterprises (MNEs) are an important source of public finance in developing economies. The research and policy debate so far have mostly focused on the "missing" part, i.e. the government revenues lost due to the tax avoidance practices of MNEs (Bolwijn et al., 2018). In this study, we take a different, but complementary, approach, looking at the taxes and other revenues actually paid by foreign affiliates of MNEs to developing-country governments. We present two alternative methodologies to estimate foreign affiliates' fiscal contribution -the contribution method and the foreign direct investment (FDI) income method -and show that they lead to the same order of magnitude. The findings allow us to set a baseline for an informed discussion on tax avoidance by MNEs.

Special economic zones (SEZs) are mushrooming across the developing world. Increasingly, policymakers resort to zones with the aim of turning around their countries' economic fortunes. Zones are expected to deliver greater innovation, exports, knowledge and technological spillovers. Yet, little is known about the state of play of SEZs in Africa, where almost half of SEZ programmes are less than 10 years old. The recent proliferation of SEZs in the continent has rendered the need to ensure that SEZs deliver on their objectives more impelling, given the often non-negligible opportunity costs associated with SEZ development. This article addresses this knowledge gap and sheds light on African SEZ practices. The analysis of a novel dataset highlights that (i) African SEZs are on a steep upward trend and are changing in nature; (ii) the ability of African SEZs to attract industrial activity, proxied by firms, and generate employment remains limited; and (iii) African SEZ governance policies (over)rely on fiscal incentives and performance requirements. Case studies from Ethiopia, Morocco and South Africa suggest that those African SEZ programmes that have a well-targeted strategic focus, promote institutional collaboration and take a proactive approach to create linkages with the local economy are more likely to succeed.