European Investment Bank exposes “hypocritical nature of western financial institutions”

The Guardian has published an article, picked up by media across the world, about the NGO follow-up to revelations in 2011 that the European Investment Bank had lent money to the Zambian firm Mopani Copper Mines (a.k.a. Glencore) which avoided paying tens of millions of dollars in local tax.

At that time the EIB suspended loans to Glencore and announced an investigation into the company’s activities.  Three years later the silence from the EIB has become deafening and, as The Guardian reports, 11 NGOs including TJN Africa and our colleagues at the Global Alliance for Tax Justice have written to EIB’s president Werner Hoyer, demanding the release of their report.  In their words:

“It is now close to nine months since Christian Aid made a formal complaint to the bank about its failure to publish the Mopani-Glencore report. Despite having had this considerable period of time, the bank still has not replied to the complaint. We consider this an inexplicable and unacceptable delay.”

The original allegations about tax avoidance arose from a leaked audit report commissioned by the Zambian Revenue Authority from accountants Grant Thornton and consulting firm Econ Pöyry which identified “unexplainable” increases in the mines’ operational costs between 2006 and 2008.  The effect of these cost increases was to reduce the profits booked in Zambia and lower the corporation tax liability.  This appears to be a standard use of trade mispricing techniques.

It is hard to construe the EIB’s three year delay in reporting back on the findings of its investigation in any light other than their refusal to be accountable to the wider public good.  As our colleagues at TJN Africa comment, the EIB’s stance is:

“characteristic of the hypocritical nature of western financial institutions such as the EIB who in one breath preach transparency but in another show no real and genuine commitment to practise these principles”