> home > News

European Investment Bank updates tax evasion policies in response to NGO pressure

27 August 2009

This week the European Investment Bank came out with a revised policy on offshore financial centres (tax havens). This is primarily in response to the G20’s interest in tax evasion, but the new policy followed closely on the publication of the Eurodad/Counter-Balance study released in June. The Bank’s release trumpets that the new policy “confirms its leadership role in preventing its corporate clients using offshore finance centres to evade taxes”. It is true that the EIB is ahead of some other international financial institutions in this respect, but its policy is by no means adequate.

Antonio Tricarico, Eurodad board member and coordinator of Campagna per la Riforma della Banca Mondiale in Italy says the EIB’s new interim policy on offshore financial centres “is a first step in the right direction”, but unfortunately insufficient to tame the massive tax evasion by transnational business”.

The main problem with the EIB’s revised policy, as before, is that it relies too heavily on the blacklisting procedure by the OECD. This procedure is too weak, as Eurodad has pointed out in a series of articles, and is allowing jurisdictions such as Belgium, Luxembourg and the British Virgin Islands to be white-listed far too easily. All they need to do is to sign cumbersome bilateral information exchange treaties with a further 12 jurisdictions, very often a dirty dozen of similar havens.

The EIB says that it will not provide funding to blacklisted countries unless the economic activity is substantially carried out there. The Bank will insist that any potential client companies based in financial intermediaries relocate elsewhere. This would represent progress if only the OECD would get more serious in its procedure to grey-list and black-list. The EIB also leaves itself substantial room for manoeuvre in how it will interpret the justification for a financial company to be based in an offshore centre. One passage of its policy states that as long as the offshore company is not “artificially structured” and “can be justified by specific economic requirements such as avoiding double taxation” then it will not take action. 

Antonio Tricarico concludes by encouraging the EU House-Bank “to take the lead worldwide in developing a more stringent definition of offshore financial centers and prohibited jurisdictions. The prohibited lists internationally at the moment do not go far enough”.

Resources

Flying in the face of development. How European Investment Bank funds enable tax havens, Eurodad/Counter-Balance, 2009

Counter Balance asks the EIB to do more and soon on cracking down tax havens

EIB publishes interim revised policy on Offshore Financial Centres