Taxation: avoiding misuse of EIB Group operations
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In view of developments in the area of taxation (including the OECD Base Erosion and Profit Shifting project and the European Union Anti-Tax Avoidance Package), since the beginning of 2017 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.
Taking note of the EU legal and policy framework as well as the EU listing process and most recent tax and anti-money laundering and countering the financing of terrorism (“AML-CFT”) developments, the EIB Group has updated its policies and adopted on 5 February 2019 the revised EIB Group Policy Towards Weakly Regulated, Non-transparent and Non-Cooperative Jurisdictions and Tax Good Governance (“EIB Group NCJ Policy”).
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. EIB Group's activities also encompass a series of mandates assigned by the EU, in support of the EU's policies.
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 criminal activities such as money laundering, financing of terrorism, tax crimes (i.e. tax fraud, tax evasion) and tax avoidance practices (“Targeted Activities”) are in line with the principles and standards of applicable EU legislation, best banking practices and applicable market standards. The EIB Group strives to enter into business relationships with contracting counterparties that are compliant with applicable laws and best market standards. The EIB Group therefore requires its contracting counterparties to comply with all applicable laws, including in the area of AML-CFT and taxation.
In this process, and more particularly for tax-related issues, the EIB Group relies on and conforms to the ratings and/or lists compiled by the lead organisations assessing the level of adherence and/or implementation of internationally and/or EU agreed standards in the field of AML-CFT and tax good governance, in particular in connection with Targeted Activities (“Reference Lists”). Lead organisations are organisations and standard setting bodies, including the European Union (“EU”), the United Nations, the International Monetary Fund, the G20, 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 (“Global Forum”) and any successor organisation (“Lead Organisations”). In the event of conflict between ratings/lists provided in different Reference Lists, any Reference List published by the EU shall prevail.
The EIB Group is fully aware that non-compliant jurisdictions (“NCJs”) can raise serious integrity concerns and are particularly exposed to the risk of facilitating Targeted Activities. With a view to mitigating the risk that the EIB Group’s financing and investment operations could be misused for Targeted Activities, the revised EIB Group NCJ Policy introduces an approach designed to (i) put in place appropriate mechanisms to protect EIB Group against the integrity and reputation risk related to such misuse, (ii) support efforts of the Lead Organisations in creating a level playing field among jurisdictions in the areas of AML-CFT and tax good governance and (iii) promote integrity in the financial markets.
EIB Group’s practice
The EIB Group NCJ Policy closely follows the EU legal and policy framework, the EU listing process and most recent Tax and AML-CFT developments. Therefore, it directly applies the prohibition to enter into new or renewed operations with entities (contracting counterparties) incorporated or established in jurisdictions listed for tax and AML-CFT purposes, except when the operation is physically implemented in the relevant NCJ and the risk (if any) that the operation could be misused for money laundering, financing of terrorism, tax crimes (i.e. tax fraud and tax evasion) and tax avoidance can be mitigated. Such limited exceptions are envisaged in order to avoid penalising the local population of countries where the EIB has received a mandate to operate.
All operations are assessed in line with the standards of the due diligence process promoted by the EIB Group AML-CFT Framework and the EIB Group NCJ Policy. Operations with NCJ links are subject to enhanced due diligence to determine whether (i) the levels of transparency and integrity of the relevant operation are satisfactory to the EIB Group (in particular the contracting counterparty/ies and their beneficial owners must be clearly identified), (ii) the contracting counterparty/ies can provide plausible justifications for the NCJ location link or (iii) there is a risk that the operation is (or may be) misused for Targeted Activities.
The enhanced vigilance may consider, on a risk-sensitive basis and as applicable, relevant elements of the Anti-Tax Avoidance Toolbox in Appendix 1 to the EIB Group NCJ Policy.
Furthermore, on a risk-sensitive basis and in line with EIB Group policies, the EIB Group may decide to extend the above-mentioned approach to operations with contracting counterparties incorporated or established in jurisdictions which are generally cooperative but have not yet solved outstanding tax good governance deficiencies. In such cases, the checks focus on the identified deficiencies of the relevant jurisdictions.
EIB Group contracting counterparties should take account of tax good governance principles and closely cooperate with the EIB Group for this purpose considering the relevant elements of the Anti-Tax Avoidance Toolbox in Appendix 1 to the EIB Group NCJ Policy.
EIB Group’s ambition
The EIB Group closely follows international developments on tax transparency, tax good governance and AML-CFT 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.