EU’s Main Lender Still Tied to Tax Havens, Watchdog Warns

Originally published on Bloomberg BNA.

April 4, 2018

By Joe Kirwin

The European Investment Bank continues to provide loans for development projects that involve companies or financial groups that either use or are based in tax havens, according to a watchdog group.

The European Commission blocked EIB projects worth more than $1 billion in 2016 “because of their links to tax havens,” higher than was previously reported, the April 3 report said. The commission confirmed in an April 3 statement to Bloomberg Tax that it has intervened to block some EIB loans.

Counter Balance, a non-governmental group, monitors the EIB—the European Union’s lending arm—and its 80 billion euro ($98.4 billion) loan portfolio. The report highlights a high-priority area for the bloc, which is focused on cutting down tax avoidance and profit shifting to tax havens. The European Parliament has previously called on the EIB to tighten its lending practices.

In a previous report, Counter Balance said that between 2011 and 2015 the EIB invested 470 million euros ($576 million) in investment funds located in “in secrecy jurisdictions.” Secrecy jurisdictions “use secrecy to attract illicit and illegitimate or abusive financial flows,” according to the Tax Justice Network.

While the bank has improved in vetting developments projects, “there is still a long way to go,” Counter Balance said.

The European Investment Bank is publicly owned and its shareholders are EU member nations.

‘To Our Regret’

The new report criticizes the way the EIB uses private equity groups for structuring loans that are based in low or no-tax jurisdictions.

“To our regret, our research found that the EIB is still investing in private equity funds structured via secrecy jurisdictions,” the report said.The EIB supported five funds in those jurisdictions, which include Luxembourg, the U.K., and Mauritius in 2016, the report said.

The EIB also uses companies or funds that take advantage of EU member nations with tax policies that promote aggressive tax planning, like Luxembourg and the Netherlands.

“In the case of Luxembourg and the Netherlands, the Commission has recently outlined how these countries have tax laws that promote aggressive tax planning,” Counter Balance Director Xavier Sol, who authored the report, told Bloomberg Tax.

EIB Forming Response

The EIB told Bloomberg Tax in an April 3 email it had received a copy of the report but “we regret that Counter-Balance did not take all of our comments into account.” It is forming a response.

In addition, the EIB noted that its procedures “are under review” when it comes to determining a policy for funds that are directly or indirectly used in “non-cooperative jurisdictions” such as those on the EU tax haven black list.

EIB policy, according to the report, prohibits investments linked to non-compliant jurisdictions. Relying on the EU’s black list “is a needed step but will not be sufficient,” the report said.

The European Commission on March 21 insisted that EU institutions such as the EIB steer clear of any country or jurisdiction on the EU tax haven blacklist. There are currently nine countries or jurisdictions on the EU tax haven blacklist: American Samoa, Bahamas, Guam, Namibia, Palau, Samoa, Saint Kitts and Nevis, Trinidad and Tobago, and the U.S. Virgin Islands.

Commission Concerns

The European Commission confirmed to Bloomberg Tax in a April 3 email it has intervened in EIB lending practices to prevent money being channeled through tax havens.

“We understand that the EIB needs to be business oriented,” the European Commission said. “But our investments should not inadvertently support global tax avoidance and EU funds should not be channeled through low or no tax countries.

“That’s why the Commission has constantly raised questions about certain projects being funded by the EIB group outside the EU and blocked them until we were satisfied that the structure of the projects was in line with our internal tax good governance standards,” the European Commission statement said.

The European Parliament approved a report in February that called on the EIB to adopt a stringent new vetting procedure to prevent loan funding from being used in or routed through tax havens.

It also insisted the EIB should issue loans to companies that use country-by-country reporting, a component of the OECD’s project to stop tax avoidance.


To contact the reporter on this story: Joe Kirwin in Brussels at

To contact the editor on this story: Penny Sukhraj at

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Twitter Digg Delicious Stumbleupon Technorati Facebook Email

No comments yet... Be the first to leave a reply!

Leave a Reply

You must be logged in to post a comment.