Norwegian Petroleum fund divested from Israeli companies, to place money in West African gold mines and British water companies

Lifted from Klassekampen.no

Billions in tax havens

Worst case: The Norwegian Petroleum Fund invested NOK 6.6 billion last year, for example in West African gold mines and British water companies registered in tax havens.
– This is just the tip of the iceberg, says the first District Attorney in the Economic Crime Division, Morten Eriksen.

The Fund invested at the beginning of this year NOK  6.6 billion alone in companies registered in the four tax havens Cayman Islands, Luxembourg, Jersey and Guernsey.

This despite the fact that the coalition government in its political platform, writes that “the government will work to combat tax havens and illicit international money transactions.”

No tax

Cayman, Luxembourg, Jersey and Guernsey are ranked among the top ten in an annual ranking of tax havens, the so-called Financial Secrecy Index. Tax havens offer foreign companies secrecy and low or no taxes, and can be utilized by companies that want to evade taxes in the countries they actually operates in.

– These are just cases where the parent company is registered in a tax haven. But the big problem is that many of the companies that have the parent company of such. United States or other respectable states have dozens of subsidiaries in tax havens which helps to prevent disclosure, says Eriksen.

The American Research Center for International Policy estimates that developing countries every year miss 7300 billion Norwegian kroner (two and a half Norwegian oil fund) in illegal capital flight, mainly because of the large companies using tax havens to evade tax.

Mines and drinking water

Klassekampen has gone through investments in stocks and bonds in companies registered in the four tax havens in the Oil Fund’s annual report for 2011.

The four states represent only a fraction of the tax havens that exist in the world, but they are chosen because there is very little real production activity in the respective countries.

Økokrim (The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) believes the Pension Fund’s investments give rise for concern.

– We now have so much negative experience with tax havens and the harmful effects of secrecy there, that it is worrying that so many large companies have chosen to register in these secrecy destinations where  generally no other activities than those for the purpose of registration are carried out, Eriksen says.

– Tax havens contribute for the most part only to undermine the rule of law in other states, by hiding important information there. The companies do by definition not carry out  local activities in tax havens, he said.

The economic activity of the companies the Petroleum Fund invest in mainly take place in other countries. The companies are engaged in, among other things, gold mines in West Africa, water supply in the UK,  telecommunication in Italy and pharmaceutical industry in Switzerland. The Norwegian Petroleum Fund has also invested in a Russian financial fund registered in Guernsey.

– One effect of the secrecy is to outmaneuver all those who ought to have access to the company, whether private investors or government agencies who potentially could be affected by any damaging effects.One thing is the danger of the commission of illegal activity. The investors’ ability to monitor whether  companies are managed according to sound corporate responsibility practices is also limited, said the public prosecutor.

Requires new practice

The Fund has previously invested large sums in tax havens. The Chairperson of the organization Tax Justice Network, Sigrid K. Jacobsen, said that the coalition must put an end to the practice.

– The Petroleum Fund’s investments in tax havens have long been known, but they have remained passive. This is very troubling when we realize the enormous damage the secrecy in tax havens inflicts on the world economy, she said.

Jacobsen says Finance Minister Sigbjørn Johnsen must take action and demand transparency from the companies the Fund invests in. She said refers to the government’s efforts to require transparency in tax payments for Norwegian companies operating there, so called country by  country reports, and believes that these rules must also apply for companies the Petroleum Fund invests in.

– By introducing this legislation also for the Petroleum Fund, Norway has the opportunity to show the world what ethical investment practice actually means. If companies do not want to enter this information, the Pension Fund should pull out, she says.

Rejects criticism
The coalition government has put the fight against tax havens high on their agenda, but denies that the Petroleum Fund’s investments in the same tax havens is paradoxical.

– We are now working on country by country reporting for international companies.We’re about to put in place tax treaties, thirty odd in number, and new countries have expressed interest in joining this. We are active, Finance Minster Sigbjørn Johnsen says.

– The Petroleum Fund has invested 6.6 billion in shares and bonds in 51 different companies in tax havens. Is not that a paradox considering that the government is actively working against tax havens?

– We are working to gain insight into what happens in tax havens. I do not see that there is a conflict, he said.