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Norwegian oil fund invested in companies accused of tax evasion

Norway has used millions of aid money to fight tax fraud by international mining companies in Zambia. The Norwegian Oil Fund has invested more than 1.3 billion kroner in the same companies. Several organizations have filed a complaint against two of the companies for violating the OECD guidelines for multinational enterprises.
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Norway has used millions of aid money to fight tax fraud by international mining companies in Zambia. The Norwegian Oil Fund has invested more than 1.3 billion kroner in the same companies. Several organizations have filed a complaint against two of the companies for violating the OECD guidelines for multinational enterprises.



Zambia is Africa's biggest copper producer, but revenues from the mining industry contributes to less than four percent of the state budget. Therefore, much of Norwegian aid to the country has been used to combat illicit financial flows and tax evasion in the mining sector.

In 2009 the Norwegian government gave financial support to an audit of the tax practices of the three largest foreign mining companies engaged in copper production in the country. Frian Aarsnes from the Norweigan branch of the consulting firm Econ Pöyry, one of the companies that conducted the audit, told the Future in our hands that the report was confidential, but that the French organization Les Amis de la Terre managed to get hold of a pilot version and published the content online.

The report concerns Mopani Copper Mine, in the north of Zambia. The biggest owner of the mine is the Swiss mineral and raw materials giant Glencore, which The Future in Our Hands recently wrote about because it is accused of gross environmental pollution and breaches of human rights in various countries. In the report the Norwegian auditors wrote that Glencore has utilised several methods of tax evasion in Zambia. According to the auditors, the company has, among other things,

  • Reported an inexplicable and improbable doubling of operating expenses from 2005 to 2007;
  • Carried out excessive accounting of losses;
  •  Had large deviations in reports of the production volumes of copper and cobalt;
  • Used price protection to avoid taxes, rather than to secure against large price fluctuations;
  • Systematically worked against the auditors in every step of the audit;
  • Submitted deficient accounts and documents.

According to the report the Mopani mine has also been selling copper and cobalt to the parent company Glencore at prices 25% below the copper prices on the London Metal Exchange.

Glencore has, in a press release, stated that they reject the charges and that the report from Econ Pöyry is full of factual mistakes and inaccuracies and is based on incorrect statistical analyses and premises.

OECD Guidelines violated

After the confidential report had been leaked, a number of organizations filed a complaint against Glencore with the OECD. SHERPA (France), the Center for Trade Policy and Development (Zambia), the Berne Declaration (Switzerland), l’Entraide Missionnaire (Canada) and Mining Watch (Canada) wrote a letter of complaint to the Swiss and Canadian National Contact Points for the OECD in which they point out that Clencore and First Quantum Minerals Ltd, a Canadian mining company that also owns shares in the Mopani mines, have violated the OECD guidelines for multinational enterprises. The organizations demand that OECD formerly recognize the violations of the OECD Guidelines committed by the corporations and ensure that the corporations refund the tax money the Mopani consortium should have owed to the Zambian Revenue Authority.

The audit report has also caused the European Investment Bank (EIB) to start an independent investigation of Glencore in Zambia. In 2005 the bank gave a loan of €48 million to upgrade the smelting plant in the Mopani mines, but in light of the information that has now emerged, EIB’s president, Philippe Maystadt, stated that they, with immediate effect, would freeze all loans to Glencore and its subsidiaries.

Oil billions to tax evaders

The Pension Funds’ investments in companies that are carrying out tax evasion has previously been criticised by many. Anti-corruption campaigner Eva Joly has pointed out that Norwegian authorities have a dilemma with regard to accordance between ethical administration of the Pension Fund and the fight against tax havens and the flight of capital. Joly, and many others, believes that Norway shows double standards when it fights corruption while it at the same time invests state funds in companies that evade taxes.

In Zambia the self-contradiction becomes evident. Altogether the Pension Fund has more than 1.3 billion kroner invested in bonds and shares in the two companies that, according to Norwegian auditors, have been carrying out massive tax evasions in the country. Simultaneously, the Ministry of Foreign Affairs and the Norwegian Agency for Development Cooperation continue spending money to combat illegal flight of capital in the country and this spring launched a new programme, “Tax for Development”, in which Zambia is one of three main collaborating countries.   

Must be part of the ethical guidelines

“In this regard, Norway has a credibility problem”, Arild Hermstad, leader of The Future in Our Hands”, stated. “Norwegian authorities can not combat illegal capital flight and tax havens on the one hand and simultaneously invest billions in companies that carry out obvious and large-scale tax evasion on the other hand.

Hermstad believes that the example of Zambia shows that there is a great need for changing the Pension Fund’s ethical guidelines. “If Norway is to be taken seriously in the fight against tax evasion and illegal capital flight, they must also include this in the administration of the Pension Fund. With the manner in which we are operating now, we are speaking with a forked tongue.  
   
About the Companies

Glencore owns 73% of the Mopani mines, and Canada’s First Quantum Minerals owns 17%.

The Pension Fund owns bonds in Glencore International AG for altogether 30,803,740 Norwegian kroner and shares for 269,824,270 in the wholly-owned subsidiary Glencore Finance Europe SA. They also have shares for 1,007,010,397 in the Canadian company First Quantum Minerals Ltd.
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