A United Nations report has found that multinational companies registered more profits in Bermuda than in China, Canada or Germany.

The report, published yesterday by UN think tank Unctad, showed that companies from a sample of 26 developed countries booked $43.7 billion of income on the island in 2014. Unctad points out that this equates to 779.4 per cent of Bermuda’s gross domestic product.

In comparison, the same group declared $36.4 billion in China, $40.9 billion in Canada and $32.4 billion in Germany, while about $30.4 billion in profits were booked in the Cayman Islands.

The report will add to the scrutiny of offshore financial centres including Bermuda from revenue-hungry major economy governments who want the multinationals to pay taxes in the places where they make their money.

Astrit Sulstarova, who heads Unctad’s Investment Trends unit, was quoted by the AFP news agency as saying: “How is it possible that in Bermuda you have more profit declared than in China? It seems that there is something that is fishy there.”

Unctad found that companies put $221 billion into countries with low tax last year — slightly down from the year before.

Luxembourg and the Netherlands, while $72 billion of investment went into two British Overseas Territories in the Caribbean, the British Virgin Islands and Cayman Islands.

The top four sources of money going into the BVI and the Caymans between 2010 and 2014 were Hong Kong, the US, Russia and China. The report focused on “special purpose entities”, or SPEs, that have little connection to the local economy in the countries in which they are based, but which are used as holding companies, or vehicles to raise capital.

“The proportion of investment income booked in low-tax, often offshore, jurisdictions is high — and possibly growing,” the report stated.

“The disconnect between the locations of income generation and productive investment results in substantial fiscal losses, and is therefore a key concern for policymakers.”

The Organisation of Economic Cooperation and Development has attempted to address this disconnect through its Base Erosion and Profit Shifting initiative, known as BEPS.

The European Union has also taken actions to clamp down on tax avoidance practices, which the report found had caused multinationals to take billions of dollars out of Luxembourg and the Netherlands in the last quarter of last year.

Unctad said the report’s findings point to the growing emergence of holding companies as major aggregators of multinational companies’ properties.

“In the case of Bermuda, the outsize profits of foreign affiliates in the country largely reflect income attributed to investors from the US,” the report states. “According to statistics from the US, the majority of the outward direct investment position in Bermuda is in holding companies, who likely serve to channel investment to other countries as well as aggregate income.”

Holding companies accounted for 40 per cent of multinationals’ total quarterly income between 2003 and 2008. This proportion had risen to 52 per cent in the years since 2008.

“The growing importance of holding companies is due to a number of factors, including the greater reliance on regional centres to coordinate activities in host countries, but their frequent location in jurisdictions with low tax rates or favourable fiscal regimes suggests that tax motivations play a key role,” Unctad concluded.

To read the full Unctad report, look under the “Related Media” heading.