A new report published today by SOMO, the Dutch Center for Research on Multinational Corporations, sheds light on a disturbing story: loans from public banks benefitting Myronivsky Hliboproduct (MHP), Ukraine’s largest agribusiness and one of Europe’s largest poultry producers, despite the company large-scale avoidance of millions of dollars in taxes.
MHP has been receiving massive public support from public banks like the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) through receiving loans worth more than EUR 600 million. This financial support helped the expansion of MHP into what can be considered a monopoly, despite mounting concerns regarding its harmful impact on the environment and local rural communities (see our previous blogpost on the matter).
Loans from the EBRD, EIB and IFC to MHP between 2003 and 2017
MHP is a vertically-integrated poultry producer comprising more than 20 companies. It controls the whole cycle from grain and fodder production, breeding, raising and the slaughter of chickens all the way to the distribution and the sale of its meat to consumers. The company for instance holds the Vinnitsya poultry farm which is considered the largest poultry farm in Europe. Aside from poultry, MHP also grows grain and produces vegetable oil, making up almost a fourth of its export revenues. The giant company is also majority owned by Ukraine’s fourth wealthiest man, the oligarch Yuriy Kosyuk.
MHP’s activities have been highly controversial and contested. Over the past years, Counter Balance, the Coalition on human rights and animal rights groups have raised a number of concerns about MHP’s bad track record and documented numerous human rights abuses including intimidation, beatings and public smear campaigns against local activists in Ukraine opposed to MHP.
Other concerns over MHP included allegations of air and water pollution, a lack of consultation with the local population, intense pressure on individual owners to lease their land, inadequate Environmental Impact Assessments, and a general lack of transparency and accountability that characterizes the company’s activities (more details can be found in these complaints to the IFC and EBRD).
The new research by SOMO adds to this already serious list of concerns, describing how MHP has been enjoying tax benefits and subsidies, while entering in elaborate schemes to avoid paying its fair share of taxes.
Although primarily a Ukrainian agricultural producer, MHP’s ultimate parent company was located in Luxembourg for 11 years, and moved to Cyprus in 2017, two known tax havens. Considering the fact that it seems to undertake no real economic activities and has few if any employees in the two countries, MHP’s presence in these tax havens appears to be primarily motivated by tax avoidance. Many of MHP subsidiaries are also themselves located in countries known as tax havens, including Luxembourg, Cyprus, the British Virgin Islands, and the United Arab Emirates.
In the meantime, MHP has been enjoying generous tax refunds and subsidies from the Ukrainian state, as well as preferential tax regimes that have allowed the company to pay no corporate income taxes on its $3 billion profits.
These new findings give a grim illustration of the type of companies that are still being supported by public banks. Considering all the above-mentioned allegations of human rights and environmental violations, and now the revelations about aggressive tax avoidance schemes, it is high time for public banks to stop their support to MHP.
Ultimately, these financiers acting under a development mandate should learn lessons from this case and ensure their investments truly support the transformation into fair and equitable societies instead of feeding oligarchs and tax-avoiding companies to whom the 'general interest' seems an alien concept.