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Blogs, Macroeconomic policies

Fools gold? How Dutch tax rules are aiding Canadian mining company Eldorado Gold to harm human rights in Greece

Currently, negotiations on bailout deals and Greek economic reform are taking place between the Greek government and its creditors (the IMF, the ECB, and EU member states).  Previous budget cuts and other austerity measures intended to reform Greece’s economy, combined with privatizing public services, have done anything but lead to growth. Instead, austerity measures have led to an economic and humanitarian crisis in Greece. One in four people is out of work. Youth unemployment stands at 60 per cent. Child poverty in Greece grew to 40.5 per cent in 2015 from 23 per cent in 2008, while cuts to health services have led to devastating social and health consequences. In fact, because of the conditionality that accompanied the financial support of its creditors, Greece was found to have violated the right to social security due to the austerity measures it imposed, according to the European Committee of Social Rights Imposed economic adjustment measures can often have devastating effects on the exercise of human rights, and this link underlines once again the importance of raising sufficient domestic revenues for states to be able to respect, protect and fulfill human rights.

Within this context, SOMO researched tax avoidance by companies in Greece, facilitated by European tax havens. The report shows the hypocrisy of EU member states that demand reform measures with destructive socio-economic impacts on the people of Greece while allowing multinationals to avoid taxes by offering them tax benefits leading to double non-taxation of corporate profits.

The case of Eldorado Gold illustrates this very well. The Canadian mining company operates and develops several mines in the north-eastern Greek region Halkidiki. One of them is the Skouries mine which is intended to be Greece’s first and biggest open-pit and underground gold mine.

The environmental impact of the mine is already visible due to the cutting of a large part of the ancient, old growth Skouries forest and scientific research predicts that the mine will cause permanent environmental damage through soil erosion, flooding, water depletion, and air and groundwater pollution.

Local resistance against the Skouries mine have often been met with brutal police repression and criminalization. Protesters have been arrested, many have been illegally forced to give DNA samples, and others have been charged with participation in a criminal organization and are awaiting trial – some with bans to travel outside of Greece – and potentially long prison sentences; even though there is no evidence of serious crimes having taken place.

The report links the environmental and human rights impact of the mining project to the tax avoiding practices of Eldorado Gold and the resulting revenue losses for Greece. Eldorado’s Greek subsidiary Hellas Gold SA that is developing the Skouries mine receives intra-company loans from a few Dutch subsidiaries which have no real economic presence in the Netherlands. The Dutch companies in turn are financed by loans from Eldorado Gold’s Babardos-based company. Interest payments on the intra-company loans, from Greece to the Netherlands as well as from the Netherlands to Barbados, remain virtually untaxed.

Both Dutch policies as well as EU legislation provide the company with benefits and loopholes that make tax avoidance possible. In 2012-2013, Eldorado’s financing structure led to a Euro 1.7 million loss in corporate income taxes for the Greek Treasury. International (within the EU, OECD and UN) efforts to tackle tax avoidance have not yet made an end to such aggressive tax planning possibilities. The question remains whether these international efforts will triumph national interests leading to a race to the bottom where no one wins. This is particular important in view of the Financing for Development conference that will take place in Addis Ababa, in July this year.  Tax revenues are central to securing the adequate health, education, and infrastructure. Achieving development goals and protecting human rights cannot be done without sufficient financial resources. Countries should therefore cooperate to tackle tax avoidance by multinationals instead of facilitating those companies which leads to the tax base erosion of other countries, especially in crisis- and debt-ridden countries such as Greece.

The SOMO research on corporate tax avoidance in Greece has shown that the Dutch State in particular has a responsibility to reform its tax system to end tax base erosion in the debt-ridden country. Rather that enforcing austerity programmes on the country through the Eurogroup of finance ministers which is headed by Dutch minister of Finance Jeroen Dijsselbloem, the government should put an end to offering multinationals with no material activities in the Netherlands fiscal advantages. It should introduce effective substance rules and withholding taxes on outgoing interest and royalty payments to stop profit-shifting through its jurisdiction by way of licensing and group financing activities. It should also implement binding business and human rights legislation to ensure good conduct of businesses incorporated in its jurisdictions and related access to legal remedy for those negatively impacted by the operations of those corporations, at home and abroad.

Click here to read the full report and background documents on which this blog by SOMO is based.


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March 2017
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