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Taxation: avoiding misuse of EIB Group operations

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Taxation: avoiding misuse of EIB Group operations

In view of recent developments in the area of taxation (including the OECD Base Erosion and Profit Shifting project and the European Union Anti-Tax Avoidance Package) the European Investment Bank Group (EIB Group) has taken additional measures to enhance its procedures and practices aimed at avoiding EIB Group operations being misused for tax fraud, tax evasion, tax avoidance, aggressive tax planning, money laundering and financing of terrorism purposes.

European Investment Bank Group (EIB Group) statement on tax fraud, tax evasion, tax avoidance, aggressive tax planning, money laundering and financing of terrorism

EIB Group’s mission

The mission of the EIB Group, consisting of the European Investment Bank (EIB) and the European Investment Fund (EIF) is to contribute, by financing sound investments, to the policy objectives of the EU, as laid down in its statutes and in decisions of the European Council. The EIB Group contributes towards the integration, balanced development and economic and social cohesion of the EU Members States. Outside the EU, the EIB Group supports the EU policies on development aid and cooperation.

As the financing institution of the European Union, the EIB Group attaches high importance to its compliance and controls framework. Reputational and Compliance risks as well as the mitigation of such risks are hence critical for the EIB Group.
  

EIB Group’s commitment

The EIB Group places great emphasis on integrity and good governance and is committed that its policies and procedures to avoid misuse of EIB Group operations for purposes of tax fraud, tax evasion, tax avoidance, aggressive tax planning, harmful tax practices, money laundering and financing of terrorism are in line with the principles and standards of applicable EU legislation, best banking practices and applicable market standards1.

In this process, and more particularly for tax-related issues, the EIB Group relies on and conforms to the lists of non-compliant jurisdictions and country assessments produced from time to time by the European Union (EU), the United Nations and international standard-setting organisations including the International Monetary Fund (IMF), the Financial Stability Board, the Financial Action Task Force (FATF), the Organisation for Economic Co-operation and Development (OECD) and the Global Forum on Transparency and Exchange of Information for Tax Purposes (“Lead Organisations”).

As EU body, the EIB Group works closely with the European Commission and fully supports the recent regulatory and policy initiatives at EU level expressed in the Anti-Tax Avoidance Package (ATAP)2  and the 4th AML- CFT Directive3, including the reference to “high risk third countries”, which build on principles enshrined in the OECD Base erosion and profit shifting action plan (BEPS) and the FATF’s recommendations4 respectively. Given that the EIB Group expects its counterparties to comply with all applicable legislation and considering that the Bank is active both inside and outside of the EU, it is important for the Bank that international regulations and standards are aligned and create a uniform level of protection against tax fraud, tax evasion, tax avoidance, harmful tax practices, money laundering or terrorist financing throughout the EU and internationally.

EIB Group is conscious of the crucial importance of the global developments and action to fight tax secrecy, tax evasion, tax avoidance and aggressive tax planning. In this context, the EIB Group welcomes the EU Anti-Tax Avoidance initiative including the creation of a common EU list of third country jurisdictions that fail to comply with tax good governance standards. The list is envisaged to be endorsed by the Council of the EU by the end of 2017 following dialogues with targeted jurisdictions to allow them to update their legal frameworks and procedures. 

In accordance with its nature and policies the EIB Group is inherently committed to comply with the EU Framework and the EU list, once adopted, will be therefore automatically incorporated in the EIB policy framework, prevailing over other Lead Organisations’ lists in case of conflict.
  

EIB Group’s practice 

Before taking a decision to invest, projects are analysed on a risk-based approach to avoid being misused for tax fraud, tax evasion, tax avoidance, aggressive tax planning, money laundering or financing of terrorism purposes. In addition to the standard due diligence process performed on operations (which includes, inter alia, identification of beneficial owners, integrity assessments to identify any sanctioned individuals or entities, screening for adverse media, presence of Politically Exposed Persons and potential conflict of interests), the EIB carries out an enhanced due diligence on every operation with higher risk factors identified, such as a potential link to a Non-Compliant Jurisdiction (NCJ)5, tax risk indicators and operations with complex multi-jurisdictional structures irrespective of the existence of NCJ links.

Having regard to the above mentioned developments, the EIB Group has reviewed and further enhanced its due diligence processes with the aim that the risk-based tax assessment identifies potential tax avoidance concerns targeted by the OECD Base Erosion and Profit Shifting action plan (BEPS) and EU Anti-Tax Avoidance Package (ATAP). This addresses considerations raised by EIB stakeholders, including the EIB Board of Directors, European Commission, European Parliament and Civil Society Organisations.
  

EIB Group’s ambition

The EIB Group closely follows international developments on tax transparency, tax good governance and anti-money laundering/financing of terrorism and proactively engages in dialogue with other International Financial Institutions as well as Civil Society Organisations to maintain its leading position by setting ambitious policies and procedures taking account of best standards and practices.
  


1 Please refer to the following documents : 
EIB Group AML-CFT Framework
EIB Policy towards weakly regulated, non-transparent and uncooperative jurisdictions
EIF Policy on Offshore Financial Centres & Governance Transparency
http://ec.europa.eu/taxation_customs/business/company-tax/anti-tax-avoidance-package_en 
3 Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC.
4 http://www.fatf-gafi.org/publications/fatfrecommendations/documents/fatf-recommendations.html 
5 Non-Compliant Jurisdiction is a jurisdiction classified by one or more Lead Organisations as not aligned to international standards in connection with prohibited activities such as money laundering, financing of terrorism, tax fraud and tax evasion (“Illegal Activities”) and harmful tax practices (“Harmful Activities”).



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