SO M O Fool’s Gold How Canadian firm Eldorado Gold destroys the Greek environment and dodges tax through Dutch mailbox companies SOMO March 2015 Fool’s gold | noun [U] UK 1. a yellow metal that looks like gold 2. something that you are very attracted to that you later find is not worth very much Colophon Fool’s Gold How Canadian firm Eldorado Gold destroys the Greek environment and dodges tax through Dutch mailbox companies March 2015 Authors: Ilona Hartlief, Katrin McGauran, Roos van Os, Indra Römgens Copy editor: Vicky Anning Layout: Frans Schupp Photo: Giannis Papanikos (www.demotix.com) ISBN: 978-94-6207-056-1 This publication was made possible through the financial support of the Halifax Initiative (Canada), InterPares (Canada), Mining Watch Canada and the Sigrid Rausing Trust (UK). SOMO would particularly like to thank individual supporters of this research who responded to a crowdfunding campaign. Besides a number of SOMO staff members, these are Jasper Blom, Tineke Egyedi, Rob Geurtsen, Mariska de Gooijer, Hugo Hoes, Marianne van Kalmthout, Gijsbert Koren, Lieke Ruijmschoot, Bahar Sakizlioglu, Georgios Smaragdos, David Sogge and Gemma Toppen. The content of this publication is the sole responsibility of SOMO. The authors would like to thank the following people for their substantial contributions to this report: Marica Frangakis (freelancer), Kees Hudig (freelancer), Maria Kadoglou (Hellenic Mining Watch), Karyn Keenan (Halifax Initiative), Jamie Kneen (MiningWatch Canada), Matti Kohonen (freelancer) and Theodora Oikonomides (freelancer). The following people reviewed specific sections of the report; their comments and additions were also invaluable: David Bruer (InterPares), George Chasiotis (WWF Greece), Roberta Cowen (SOMO), Rodrigo Fernandez (SOMO/University of Leuven), Christina Laskaridis (Corporate Watch), Patrick Kryticous Nshindano (ActionAid Zambia), Sol Picciotto (Lancaster University), Gerhard Schuil (SOMO) and Francis Weyzig (Oxfam Novib). Published by: Stichting Onderzoek Multinationale Ondernemingen (SOMO) Centre for Research on Multinational Corporations Sarphatistraat 30 1018 GL Amsterdam The Netherlands T + 31 (20) 6391291 F + 31 (20) 6391321 [email protected] www.somo.nl The Centre for Research on Multinational Corporations (SOMO) is an independent, not-for-profit research and network organisation working on social, ecological and economic issues related to sustainable development. Since 1973, the organisation investigates multinational corporations and the consequences of their activities for people and the environment around the world. Fool’s Gold How Canadian firm Eldorado Gold destroys the Greek environment and dodges tax through Dutch mailbox companies SOMO Ilona Hartlief, Katrin McGauran, Roos van Os, Indra Römgens Amsterdam, March 2015 Contents Acronyms .............................................................................................................. 4 List of Tables .......................................................................................................... 5 List of Figures ........................................................................................................ 5 1 Introduction ...................................................................................................... 6 1.1 Focus of the report ...................................................................................... 6 1.2 Tax and human rights .................................................................................... 7 1.3 Is gold mining the answer to Greece’s financial crisis? ............................................ 9 1.4 Structure of the report ................................................................................. 11 1.5 Methodology ............................................................................................ 12 1.6 Definitions ................................................................................................ 13 1.7 Limitations and follow-up research ................................................................... 15 2 Eldorado Gold in Greece: a human rights case .........................................................16 2.1 Introduction .............................................................................................. 16 2.2 Eldorado Gold Corporation: facts and figures ..................................................... 17 2.3 Eldorado Gold in Greece .............................................................................. 19 2.4 Mining in Halkidiki: selling out the public interest ................................................ 22 2.5 Environmental destruction ............................................................................. 24 2.6 Disregarding and criminalising the opposition to mining ........................................ 29 2.7 Conclusion ................................................................................................ 33 3 State subsidy ....................................................................................................35 3.1 Introduction .............................................................................................. 35 3.2 Support from Export Development Canada (EDC) ................................................ 35 3.3 An Eldorado for investors: fast-track fiscal benefits ............................................... 37 3.4 Conclusion ................................................................................................ 38 4 Avoiding tax through the Netherlands ....................................................................39 4.1 Introduction .............................................................................................. 39 4.2 The Netherlands: a tax haven – for mining companies ........................................... 41 4.3 Eldorado Gold in the Netherlands ................................................................... 44 4.4 Functions of Eldorado Gold’s Dutch subsidiaries .................................................. 47 4.5 Profit shifting through Dutch mailbox companies ................................................. 48 4.5.1 Policy history ............................................................................................. 49 4.5.2 Method: Rerouting interest payments ............................................................... 50 4.5.3 Using a cooperative and tax rulings ................................................................. 55 4.6 Other potential tax gaps to consider ................................................................ 56 4.7 Eldorado Gold’s reported tax payments ............................................................ 60 4.8 Conclusion ................................................................................................ 62 2 5 Investments between Greece and EU tax havens ......................................................64 5.1 Introduction .............................................................................................. 64 5.2 Greek inward and outward FDI positions ........................................................... 64 5.3 Mailbox companies (SPEs) and international tax avoidance ..................................... 67 5.4 The relevance of SPEs to FDI statistics for the Netherlands and Luxembourg ............... 68 5.5 Investments in Greece routed via Dutch Special Purpose Entities ............................. 72 5.6 Companies active in Greece using conduit entities in the Netherlands and Luxembourg . 73 5.7 Conclusion ................................................................................................ 77 6 Regressive taxation and Troika measures in Greece ...................................................78 6.1 Introduction .............................................................................................. 78 6.2 Focus of public debate and (imposed) reforms in Greece ....................................... 78 6.3 Greece’s regressive tax regime and its causes ..................................................... 79 6.4 Troika-imposed ‘fiscal consolidation’ ................................................................ 82 6.4.1 Troika-imposed fiscal and investment policies ..................................................... 83 6.4.2 The impact of fiscal consolidation .................................................................... 84 6.5 The impact of austerity in Greece .................................................................... 84 6.6 Conclusion ................................................................................................ 87 7 Conclusions ......................................................................................................88 7.1 Recommendations ...................................................................................... 90 7.2 Further research ......................................................................................... 94 3 Acronyms APA Advance pricing agreement ATR Advance tax ruling BAT Best available technique BC British Columbia (Canada) BEPS Base erosion and profit shifting BIT Bilateral Investment Treaty BOP Balance of payments CBCA Canada Business Corporations Act CbCR Country-by-Country Reporting CDIS Coordinated Direct Investment Survey (IMF) CIT Corporate income tax DG Directorate-General DNB De Nederlandsche Bank (Dutch Central Bank) DTT Double taxation treaty EAP Economic Adjustment Programme ECA Export credit agency ECB European Central Bank EDC Export Development Canada EIA Environmental