Policy recommendations

  • The European Savings Directive needs to be extended by the European Member States. The automatic exchange of information should include companies and trust funds as well. This creates the opportunity to get information on MNCs as well as individuals, and it would make it more difficult to evade taxes.
  • The European Commission should be mandated to impose strict penalties on Member States which do not comply with good governance in tax matters, like the Member States that still support tax havens on their territories.
  • The European Union, on behalf of the Member States should oblige country-by-country reporting for MNCs enlisted in the EU.
  • The European Union should oblige MNCs to disclose the beneficial ownership, which would create transparency on transfers between companies, and increase the chance of ending transfer pricing.[28]

Case: Fair Taxes

27-04-2011 Schnieber-Jastram addresses possible violation of PCD in Zambian coper mine

In 2005 the European Investment Bank (EIB) granted a 48 million euro loan to the Mopani Copper Mine (MCM) in Zambia. In 2008 an international tax audit team assisted in a pilot audit of selected mining companies in Zambia. On 13 February some results leaked and indicated that the MCM used tax avoidance practices. It was concluded that the mining sector in Zambia has been marginalised due to unfavourable terms agreed upon in the privatization of the Zambian Consolidated Copper Mines (ZCCM).

In the framework of the policy case study on Fair Taxes, Fair Politics addresses the matter of tax avoidance, which results in more money outflow than inflow in a country, like Zambia, and inhibits development. Taxes should be the main source of income of  governments which they can spend on development, but via tax avoidance of companies like MCM this money is lost thus limiting development. This case of tax avoidance in the Zambian mining company is a clear example of violation of Policy Coherence for Development (PCD). In this case a mining company is involved, linking this question also to the Raw Material Initiative, which is also obliged to fulfil to the EUs PCD commitments.

Fair Politics is pleased to see this question of MEP Birgit Schnieber-Jastram (EPP) on the violation of the EU development policy by tax avoidance. Therefore, Schnieber-Jastram recieves one point in the monitoring system of Fair Politics towards the Fair Politician of the Year 2011 elections!

Monitor fair: EPP

Parliamentary Question
P-002324/2011
3 March 2011
WRITTEN QUESTION, by Birgit Schnieber-Jastram (EPP)

Subject: Leak of audit report on Mopani Copper Mine in Zambia
In 2008, the Zambian Revenue Authority (ZRA) engaged an international tax audit team, comprised of Grant Thornton and Econ Poyry, to assist in a pilot audit of selected mining companies operating in Zambia.
One of the companies audited was Mopani Copper Mine (MCM) which was selected because of its size and the high level of declared costs. In 2005, the European Investment Bank (EIB) granted a 48 million euro loan from its investment facility to MCM, to rebuild and modernise the companys smelter in Mufurila.
On 13 February the ZRA announced that some of the results of the audit which has not been finalised yet had been leaked. Nevertheless, the inconsistencies uncovered in MCMs accounts as a result of the audit suggest that the company may be using tax avoidance practices in Zambia. Furthermore, the company allegedly seems to have resisted the pilot audit at every stage. The Least Developed Countries Report 2011 also came to the conclusion that the contribution of the mining sector to the fiscal budget of Zambia has been marginal due to unfavourable terms agreed upon during the process of privatization of the Zambian Consolidated Copper Mines (ZCCM).
If confirmed, this situation would be a violation of the principle of policy coherence for development.
I therefore ask the Commission:
1. Will the pilot audit be made available to the European Parliament when it is finalised?
2. If the allegations, which include environmental (water, air and soil pollution) and social damage (forced expulsions), are confirmed, is there any possibility for compensation for damage done in Zambia or a repayment of the loan to the EIB?
3. Do you see any possibility for a renegotiation of the terms agreed on during the process of privatisation of the ZCCM?
4. What steps should be taken next in order to correct the situation and prevent similar problems? Is it necessary to improve the respective due diligence mechanisms of the EC and the EIB?