EIB Toughens Policy On Offshore Financial Centres

by Ulrika Lomas, Tax-News.com, Brussels

01 September 2009

Any counterparty to a contract with the European Investment Bank (EIB) will have to ensure that it is not incorporated in a jurisdiction named on the Organization of Economic Cooperation and Development’s (OECD) ‘grey list’ from March 31 next year.

The new rule was announced by the EIB on August 25 as part of its interim revised policy on offshore financial centres, which seeks to ensure that the bank’s conduct is “fully in line” with the principles endorsed by the G20 summit of world leaders in London in April 2009.

“With the adoption of the Interim Revised OFC Policy, and as the European Union’s long-term financing institution, the EIB confirms its leading role in addressing the problems caused by non-cooperative jurisdictions, including tax havens, as well as its commitment to ensure that its loans are used for the purposes intended – that is, the promotion of EU priority objectives,” the EIB stated.

The European Investment Bank was created by the Treaty of Rome in 1958 as the long-term lending bank of the European Union. The bank is tasked with contributing towards the “integration, balanced development and economic and social cohesion of the EU member states”.

Jurisdictions named on the OECD’s ‘grey list’ have committed to, but not yet substantially implemented, the “internationally agreed tax standard,” which, at the moment, means entering into at least 12 Tax Information Exchange Agreements.

As of August 28, the grey list contains mainly offshore financial centres (or “tax havens” as the OECD likes to call them), but there is also a sub list of 10 “other” financial centres on the grey list, which includes Austria (an EU member state) and Switzerland.

The revised policy also confirms the EIB’s existing commitment to refuse to operate wherever there is a link to a ‘blacklisted’ jurisdiction, unless the project is physically located there and there is no evidence the project is being used for money laundering or tax avoidance purposes. At present, there are no countries or territories on the OECD’s ‘blacklist,’ which names and shames jurisdictions that have not committed to the internationally agreed tax standard.

The EIB’s revised policy now officially adopts country lists produced by the OECD and other supranational bodies such as the International Monetary Fund, the Financial Stability Board and the Financial Action Task Force.

From March 31, all of the EIB’s new contracts will include a relocation clause requiring the counterparty’s relocation to a ‘compliant’ country if its jurisdiction of incorporation subsequently becomes classified as an offshore financial centre or equivalent by any of these organizations.

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