EU publishes its first tax haven blacklist

By on 12/12/2017
Panama, one of the jurisdictions named on the EU's first blacklist of tax havens (Image courtesy: Mattias Hill).

The European Union has published its first blacklist of tax havens, naming 17 jurisdictions including Panama, South Korea and the United Arab Emirates.

The list, which was agreed at a meeting of European finance ministers last week, is the result of a one-year exercise that involved screening 92 countries and asking their governments to plug any tax loopholes that were found.

“This list represents substantial progress,” said Pierre Moscovici, commissioner for economic and financial affairs, after the meeting. “It’s very existence is an important step forward. But because it is the first EU list, it remains an insufficient response to the scale of tax evasion worldwide.”

What sanctions?

It is expected that countries on the blacklist will be barred from receiving EU funding except through development aid programmes, and may find it more difficult to work with EU institutions on international financial operations.

However, ministers did not agree on EU-wide sanctions against blacklisted countries at the meeting, where measures under consideration included imposing a “withholding tax” on transactions to tax havens and other financial penalties, the BBC reported.

Some member states, such as Luxembourg and Malta, opposed stricter sanctions, officials said.

Moscovici urged member states to devise their own sanctions. “I also call on ministers to agree quickly on dissuasive national sanctions,” he said, as reported by The Guardian. “We must do everything we can to keep up the pressure on all of these countries. We must not accept unfair tax competition and opacity.”

The other countries on the blacklist are: American Samoa, Bahrain, Barbados, Grenada, Guam, Macau, the Marshall Islands, Mongolia, Namibia, Palau, Saint Lucia, Samoa, Trinidad & Tobago and Tunisia.

Saint Lucia, another country on the EU tax haven blacklist.

Grey areas

The screening exercise was carried out by the Council of Ministers’ code of conduct working group, using EU standards for fair tax rules, transparency and implementation of anti-profit shifting measures that were set by the OECD.

Countries were blacklisted if they failed to meet the standards and did not take “meaningful action” to address deficiencies identified by the group or engage in “meaningful dialogue” on the basis of the criteria.

Ministers also issued a “grey list” of 47 countries which have agreed to address aspects of their tax systems that fail to meet the EU benchmarks and will be subject to further screening. This list includes Bermuda, the Cayman Islands, Jersey, Switzerland, Turkey and Hong Kong.

The EU has issued deadlines for meeting the benchmarks to territories on the grey list, with developed countries given one year and developing countries allowed two years.

Eight Caribbean countries that were battered by hurricanes in October have been given a reprieve until February, when they will be asked to start addressing the EU’s concerns with a view to resolving issues by the end of 2018.

They are: the Bahamas, the British Virgin Islands, Antigua and Barbuda, the US Virgin Islands, Anguilla, St Kitts and Nevis, Dominica, the Turks and Caicos.

The pressures on designation

EU officials said that Britain had shown reticence over the screening process, according to Reuters. No British Overseas Territories, such as the Cayman Islands or Bermuda, nor the Crown Dependencies of Jersey, Guernsey and the Isle of Man, are on the black list, in what some regard as a diplomatic victory for London. They were put on the grey list instead.

Oxfam criticised the EU for not applying its criteria objectively, free from political pressure, and not including member states. After carrying out its own exercise using the same criteria, the charity said it found 35 tax havens outside the EU and four within it: Ireland, Malta, Luxembourg and the Netherlands.

Aurore Chardonnet, Oxfam’s EU policy advisor on inequality and tax, said: “It is disturbing to see mostly small countries on the EU blacklist, while the most notorious tax havens got away on the ‘grey list’. The EU has to make sure governments on the grey list follow up on their commitments, or else they must be blacklisted.

“Urgent tax reforms are also needed inside the EU. As long as tax havens remain at the heart of the EU, it is hard to believe that they will push for further reforms by countries on the ‘grey list’ or agree on strong sanctions.”

Tax avoidance has been pushed up the political agenda by a series of leaked revelations about activities linked to tax havens. The Paradise Papers, which were released in November, followed the Panama Papers in April 2016 and the Luxembourg Leaks in November 2014.

About Liz Heron

Liz Heron is a journalist based in London, who specialises in international news. She worked on daily newspapers for 16 years, reporting extensively on both general news and education. She was Education Editor of the South China Morning Post in Hong Kong and has contributed to a wide range of British media including The Independent, The Guardian and the BBC.

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