Five NGOs (1) have filed a complaint (2) against Glencore International AG and First Quantum Minerals Ltd for violating the OECD guidelines for multinational enterprises as their Zambian subsidiary Mopani Copper Mines (MCM) is alleged of dodging taxes for their benefit. MCM received a €48 million loan from the European Investment Bank (EIB).

“We fully support this complaint”, says Anne-Sophie Simpère from Friends of the Earth France, a Counter Balance member. “And we demand that the EIB, that granted a public loan to MCM, conducts an open and independent investigation to clear out how the company tax practices and their compatibility with the EIB development mandate. In case the EIB finds Mopani was indeed involved in tax fraud, it should take exemplary measures against the company and to make sure similar cases will not happen again.”

The complaint is based on a secret tax audit made public by Counter Balance last February. The audit revealed the companies’ subsidiary MCM – among other irregularities – kept an incomplete bookkeeping, artificially inflated costs and sold commodities far below market prices to its mother companies. As a result taxes to be paid in Zambia were reduced to an absolute minimum and profits were siphoned to the canton of Zug, Switzerland, where a much more favourable tax regime is applied.

According to the five organisations submitting the case to the OECD’s National Contact Points in Canada and Switzerland, these manipulations constitute a violation of OECD’s “arm’s length” principle. The complainants note Mopani’s financial and accounting manipulations are all the more deplorable when one considers that the Mopani consortium operates in an already attractive fiscal environment, one highly favourable to foreign investment, and that Mopani also enjoys the effects of a 2000 development agreement with Zambia that provides massive financial and tax exemptions.

Informed about the alleged misbehaviour of the company it granted a loan, the EIB announced they will investigate this matter and take all necessary measures to address this issue. However it hasn’t made public any information about the what, why, how and when of the investigation.

“The EIB should make the timeline and modalities of the investigation public, and release its findings as soon as the investigation is over. Opaqueness has lead to this scandal now it’s time for openness”, Anne-Sophie Simpère concludes.

Note for editors:

(1) SHERPA (France), the Center for Trade Policy and Development (Zambia), the Berne Declaration (Switzerland), l’Entraide Missionnaire (Canada) and Mining Watch (Canada)