Saturday

23rd Sep 2017

EIB must tighten rules on tax havens, NGOs warn

  • Money from the European Investment Bank is finding its way to tax havens, campaigners have warned (Photo: EIB)

The European Investment Bank (EIB) must tighten up its lending rules to prevent its money being funnelled through tax havens, NGOs have warned in a new report.

The report ‘Towards a Responsible Taxation Policy for the EIB’, published on Tuesday (21 April) by transparency NGOs Re-Common and Counter Balance, calls on the Luxembourg-based to set up its own ‘Tax Unit’ to assess how much corporate tax its clients are paying, and produce its own analysis of tax havens rather than rely on the OECD’s ‘black and grey’ list of jurisdictions.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The EIB lent more than €77 billion in 2014, of which €8 billion went to investment projects outside the European Union. The Luxembourg-based bank lends directly to an array of large and small businesses and other financial institutions.

The NGOs argue that identifying beneficial ownership - where a company has a secret owner - would allow the EIB to know who ultimately owns, controls or benefits from a company or fund that receives its support.

EIB clients should also be required to produce country-by-country-reports, the report adds.

“Countries receiving loans from the public, though institutions like the EIB, should declare to the public their beneficial owners and information on where the profits from a project will accrue,” the report argues, adding that this “would allow the public to see whether companies are engaged in off-shoring their profits into tax havens.”

This demand for all companies seeking EIB funds to publish country-by-country-reports (CBCR) also featured in a European Parliament report adopted in March 2014. At present, EU rules require CBCR only from banks and firms in the extractive and logging sectors.

“Recent revelations such as Luxleaks and Swissleaks prove that Europe is losing out billions of euros because of tax dodging, and in developing countries the situation is even worse,” said Antonio Tricarico, the report’s author.

In reply, the EIB noted that most of the reforms proposed by the report would require legal changes to be agreed by MEPs and ministers.

The EIB has a policy commitment to preventing tax avoidance, money laundering and other damaging activities, including a general prohibition on investments linked to non-compliant jurisdictions (NCJ) or tax havens.

However, a report by the Illicit Finance Journalism Project last October found that the EIB had lent money to a number of companies operating in tax havens. For example, Qalaa, an African investment fund with $9.5 billion on its books, has received hundreds of millions of euros from the EIB, but is domiciled in the British Virgin Islands.

The EIB, which relies on the EU’s 28 countries for its capital, is one of the largest development banks in the world. Its triple-A credit rating and ability to borrow large amounts of cash at low interest rates makes it a highly attractive institution for private firms to work with.

In Europe, meanwhile, the bank is set to be the driving force behind the European Commission's flagship €315 billion infrastructure investment fund.

EU tax havens drain money from developing nations

Tax havens in places like Luxembourg are zapping billions of euros from the coffers of developing countries and forcing weak governments to rely on dwindling international development aid, experts say.

Investigation

Europe’s tax haven investments in Africa

A combination of lax rules and no-questions-asked policy means that money from the European Investment Bank, the EU's longterm lending institution, is flowing to tax havens. An Egyptian case study shows how this happens.

Analysis

Merkel-Macron: An EU motor in the making

Merkel's re-election is expected to revive the Franco-German EU motor, but the German leader and France's new ruler are still searching for a common vision.

May seeks EU grace period

Eagerly awaited Brexit speech was foggy on details, but May pledged to honour financial commitments while calling for a two-year transition deal after the UK left.

Hungary and Poland defy EU authority

Hungary and Poland have said they "don't want a mixed population", amid a tug-of-war with the Commission on migrants and rule of law.

May seeks EU grace period

Eagerly awaited Brexit speech was foggy on details, but May pledged to honour financial commitments while calling for a two-year transition deal after the UK left.

Analysis

Merkel-Macron: An EU motor in the making

Merkel's re-election is expected to revive the Franco-German EU motor, but the German leader and France's new ruler are still searching for a common vision.

News in Brief

  1. Dutch state appeals ban on taking air-polluting measures
  2. May proposes 2-year transition period after Brexit
  3. May to call on EU's 'sense of responsibility'
  4. Catalonia has 'contingency plans' for independence vote
  5. Last German polls confirm Merkel's lead
  6. EU to step up sanctions on North Korea
  7. Tusk calls 'euro summit' in December
  8. Report: May to seek two-year EU transition

Stakeholders' Highlights

  1. EU2017EEEU Finance Ministers Agreed to Develop New Digital Taxation Rules
  2. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  3. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  4. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  5. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  6. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  7. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  8. Mission of China to the EUChina Leads the Global Clean Energy Transition
  9. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  10. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  11. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  12. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel