Eldorado Gold devastates Greek communities but avoids paying tax

Published by MAC on 2015-04-01
Source: SOMO, Canadians for Tax Fairness, MiningWatch Canada, The Globe and Mail

Canadian mining company Eldorado Gold devastates Greek communities, uses the Netherlands, Barbados to avoid tax

Tax avoidance by Canadian mining company Eldorado Gold has led to major tax losses for Greece. There are also serious environmental and human right concerns related to the company’s operations

SOMO - Canadians for Tax Fairness - MiningWatch Canada press release

30 March 2015

Ottawa/Amsterdam - Canadian mining company Eldorado Gold is undermining Greek economic recovery by large-scale tax avoidance according to a new report by the Dutch Centre for Research on Multinational Corporations (SOMO). Eldorado is also supported by Export Development Canada.

Fool’s Gold reveals that tax avoidance by Canadian mining company Eldorado Gold, using “mailbox” (shell) companies in the Netherlands, has led to tax losses of at least CDN $2.3 million for Greece in the past two years. There are also serious environmental and human right concerns related to the company’s operations.

Eldorado Gold avoids tax in Greece

Fool’s Gold shows that Eldorado Gold finances its Greek operations using internal loans, shifting interest payments from Greek subsidiary, Hellas Gold SA, via Dutch mailbox companies to its Barbados subsidiary – where this income remains untaxed. Eldorado has no material operations in the Netherlands or in Barbados. Under this financing structure, future profits from Eldorado’s Greek operations and related income tax can be substantially reduced – especially when combined with transfer mispricing and other tax avoidance techniques widely used by extractive sector firms.

“The European Union and the Netherlands have double standards. On the one hand they impose harsh austerity measures which have devastating social and economic impacts in Greece; on the other hand, they actively facilitate tax avoidance which costs the Greek state millions of euros,” says SOMO researcher Katrin McGauran.

Canadian government supports tax avoidance and irresponsible investment

Canada supports tax avoidance through lax disclosure requirements and tax treaties with tax havens, allowing companies to channel their international investments through tax havens and minimize tax paid anywhere, including Canada and the country they are operating in.

“Canada has been very timid in pursuing tax avoidance by Canadian companies operating internationally, including profit-shifting using tax havens,” Dennis Howlett, Executive Director of Canadians for Tax Fairness, says. “We are calling on the federal government to step up enforcement, but also to review all of its bilateral tax treaties to eliminate this theft of money rightfully owed – and especially in the case of Greece, desperately needed.”

The Canadian government also supports Canadian mining investment politically – as seen in a Youtube video of Canadian Ambassador to Greece, Robert Peck, hectoring Alexandroupolis Mayor Vagelis Lampakis over his community’s opposition to Eldorado Gold’s operations in Thrace. In addition, and despite widely reported human rights and environmental concerns, both the Canada Pension Plan and Export Development Canada have significant interests in Eldorado Gold.

The Canadian government promotes mining investment as good for both Canada and the host country, but according to MiningWatch Canada’s Communications Coordinator, Jamie Kneen, this is deceptive and needs to be dropped. “In reality, there’s no evidence this investment benefits more than a few very wealthy people – not most Greeks, or even Canadians.”

Tax avoidance, a structural problem

The case of Eldorado Gold is not an isolated one. The Netherlands and Luxembourg are widely used tax conduit countries for foreign companies investing in Greece. The report shows that 80 per cent of direct investments from the Netherlands to Greece are routed through mailbox companies – an underreported issue in discussions on the causes of Greece’s budget deficit.

Livelihoods threatened

Mining is set to destroy local ancient forests in Halkidiki, and the local community fears pollution from the mine will endanger them and destroy local jobs that depend on tourism, small-scale farming, forestry and fishing. Protests by the local community against the mine have been brutally repressed by police and criminalised by the Greek state. While the former government supported the company’s mining plans, the new government has stopped Eldorado’s expansion while it reviews the company’s permits and contracts.

Note for editors

Contacts

Jamie Kneen, MiningWatch Canada: (613) 569-3439, jamie[at]miningwatch.ca
Dennis Howlett, Canadians for Tax Fairness: (613) 863-3670, dennis.howlett[at]taxfairness.ca

For specific questions regarding the SOMO report:

Indra Römgens, SOMO: 00 31 6 441 53644, 00 31 20 5356059, i.romgens[at]somo.nl
Katrin McGauran, SOMO: 00 31 6 498 11026, K.McGauran[at]somo.nl

Downloads

• Download the report, summary and research data for ‘Fools Gold’ - http://miningwatch.us4.list-manage2.com/track/click?u=c89185f430617e4dc1a02762e&id=d23cfc9cb7&e=e1197aff38
• Read the full story of Eldorado Gold in Greece - http://miningwatch.us4.list-manage.com/track/click?u=c89185f430617e4dc1a02762e&id=8efd73bb7d&e=e1197aff38
• Watch the short video summary - http://miningwatch.us4.list-manage2.com/track/click?u=c89185f430617e4dc1a02762e&id=ae1f0811a4&e=e1197aff38

About MiningWatch Canada

MiningWatch Canada is a pan-Canadian initiative supported by environmental, social justice, Aboriginal and labour organisations from across the country. It addresses the urgent need for a co-ordinated public interest response to the threats to public health, water and air quality, fish and wildlife habitat and community interests posed by irresponsible mineral policies and practices in Canada and around the world. www.miningwatch.ca

About Canadians for Tax Fairness

Canadians for Tax Fairness is a not-for-profit, non-partisan organization advocating for fair and progressive tax policies aimed at building a strong and sustainable economy, reducing inequalities and funding quality public services. It is a member of the Global Alliance for Tax Justice. www.taxfairness.ca

About SOMO

SOMO is an independent not-for-profit research and network organisation. SOMO works on sustainable development, in social, environmental and economic terms. Since 1973 SOMO has been researching multinational enterprises and the consequences of their activities for people and environment around the world. www.somo.nl

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Eldorado Gold faces accusations of tax avoidance in Greece

Eric Reguly

The Globe and Mail

30 March 2015

Canada’s Eldorado Gold Corp., the biggest foreign investor in Greece, is engaged in a tax-avoidance scheme that uses mailbox companies in the Netherlands to lower its tax load, a new report from a Dutch foundation says.

The Centre for Research on Multinational Corporations, known as SOMO, made the claim in a detailed 116-page report called Fool’s Gold, which was released in Amsterdam Monday and will be presented Wednesday in Athens at a panel discussion featuring Norway’s Eva Joly, a member of the Green Party in the European Parliament.

The report claims the scheme has cost the Greek government at least €1.7-million ($2.3-million) in revenue in the past two years.

The timing of the report was apparently no accident. It came as Eldorado fights hard to keep its Greek mining operations going in the face of threats from Greece’s new radical left Syriza government to shut down or curtail them over environmental concerns. It also came a month after the European Parliament’s committee on tax rulings revealed it is examining allegations that some European Union countries are using special tax regimes or deals to favour large companies.

The Eldorado tax-avoidance manoeuvre described by SOMO is neither illegal nor rare. Foreign companies often use mailbox companies in the Netherlands, Luxembourg and Cyprus to channel money between entities within corporate groups. They are also known as shell companies or special purpose entities. Usually, they have no operating assets or employees.

Katrin McGauran, a SOMO researcher who is the co-author of the Eldorado report, said the mailbox companies expose Greece’s bailout masters as hypocrites.

“The European Union and the Netherlands have double standards,” she said. “On the one hand, they impose harsh austerity measures, which have devastating social and economic impacts on Greece. On the other hand, they actively facilitate tax avoidance, which costs the Greek state millions of euros.”

Eldorado’s vice-president of investor relations, Krista Muhr, said “we absolutely deny all allegations” put forth by SOMO, but gave few details as to what the company thinks the SOMO report got wrong. “We have not made any tax savings from Greece,” she said. “All revenue generated in Greece is taxable in Greece.”

She said the company has paid about €50-million in taxes to the Greek state since 2012. “We are therefore not depriving the Greek state of an important source of income, but rather we are creating an important source of tax revenue for the Greek state,” she said.

The conclusions of the report would have come as no surprise to Eldorado, which is pumping $1-billion (U.S.) into four mining operations in northern Greece, dominated by the Skouries gold mine. Last year, SOMO published a “discussion paper” on Eldorado’s tax-avoidance methods. Ms. McGauran said Eldorado declined to comment on the report that she said “looked very much like the new report” and that Eldorado had ample time to review the new report before it was published.

SOMO, formed in 1973, is an independent research organization that works on sustainable development issues and the impact of multinational corporations on society and the environment. Its 2013 budget of €3-million was funded by the Dutch Foreign Ministry, the European Union and private funds. The Fool’s Gold report itself was funded by the Halifax Initiative of Canada, Interpares, Mining Watch Canada and the Sigrid Rausing Trust of Britain.

The report said Eldorado’s tax-avoidance plan relied on shifting money from high-tax to low-tax countries. SOMO determined that Eldorado’s Greek subsidiary, Hellas Gold, issued unsecured bonds, worth €96-million in 2013, to several Dutch companies controlled by Eldorado. In turn, the Dutch companies were financed by loans from an Eldorado company in Barbados. Interest payments on the bonds and loans, both from Greece to the Netherlands and from the Netherlands to Barbados, went virtually untaxed, the report says.

Eldorado admits it has Dutch companies but denies they are merely mailbox operations. “In the Netherlands, we have a physical office location with full-time employees,” she said.

The SOMO report says Eldorado has at least seven Dutch subsidiaries, only one of which has employees – three in the case of a holding company called Eldorado Gold Cooperatief UA (Eldorado says it has five employees in Amsterdam, one of which is a tax manager).

In a 2013 U.S. Securities and Exchange Commission filing, Eldorado admitted that its efforts to structure the company “in a commercially efficient manner” could result in increased taxes and tax penalties “if any such planning effort is considered by a taxation authority to constitute tax avoidance.”

Eldorado has invested about $450-million so far to build the Skouries gold mine and another mine, called Olympias, whose development has often triggered violent protests. In March, the Greek government presented Eldorado’s Greek subsidiary with a formal notice revoking a permit required for the final construction of the Skouries processing plant.

Eldorado chief executive officer Paul Wright said failure to restore the permit “may force Eldorado to reconsider its investment plans for Greece.”