Taxing contradictions

The EU claims that there is a link between tax evasion and global poverty. However, the EU continues to lend money to banks who participate in tax haven schemes.

From the IPS, writer David Cronin explores this contradiction.

Throughout 2009 statements issued by the EU’s most powerful bodies acknowledged a scourge estimated to reduce by 160 billion dollars a year the amount of revenue which poor countries can collect.

While these statements suggest that the EU is doing everything it can to crackdown on the scourge, the EIB has, since 2004, provided loans worth more than 5.6 billion euros (8.2 billion US dollars) to the largest users of tax havens from Britain, France and the Netherlands, according to research conducted by the European Network on Debt and Development (Eurodad), an alliance of anti-poverty groups.

Recipients of EIB loans include BNP Paribas and ING, the French and Dutch banks with the highest number of branches and affiliates in tax havens, and Barclays, which hatched a plan in 2007 to generate profits by availing of tax evasion schemes in the Cayman Islands and Luxembourg.

Furthermore, the EIB has been heavily criticised for directing much of the loans it gives in Africa to so-called alternative investment funds which take advantage of moves towards greater trade liberalisation on the continent.

Most of the EIB’s assistance to Africa’s financial sector over the past five years has gone to just one firm, European Financing Partners (EFP), which received 196 million euros (288.8 million dollars) from the Luxembourg bank over that period.

EFP regularly works with investors like Britain’s Commonwealth Development Corporation which concentrate their African activities in Mauritius - widely considered to be the continent’s principal tax haven.

Nuria Molina, the Eurodad director, has suggested that EIB’s loans contradict the EU’s stated commitment to ensure that its development aid activities are not undermined by work undertaken in pursuit of other policies. In 2005, the EU undertook to ensure that there is "coherence" between its different policy activities so that they contribute to poverty reduction.

But Molina told a Brussels conference on Dec. 9 that progress towards realising this objective has been "piecemeal".