The European Union’s First Tax Haven Blacklist Revealed

The European Union’s First Tax Haven Blacklist Revealed

On Tuesday, December 5th, the European Union released its first blacklist of tax havens with the inclusion of 17 jurisdictions deemed by the region as facilitating tax avoidance and evasion.

Following several months of research and analysis, EU officials named American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and the United Arab Emirates to its final blacklist of tax havens.

The EU’s tax head, Pierre Moscovici, praised this initiative as “an important step forward,” but warned that “it remains an insufficient response to the scale of tax evasion worldwide."

Moscovi added, “I therefore call on the finance ministers to avoid any naivety on commitments. The countries that have taken commitments must change their tax laws as soon as possible. I also call on ministers to agree quickly on dissuasive national sanctions. 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.”

Furthermore, French Finance Minister Bruno Le Maire remarked that 47 other others make up a “gray” list of jurisdiction that do not necessarily comply with EU standards but have vowed to reform their tax legislation to fall in line with that of the region.

This gray list includes jurisdictions such as Hong Kong, Jersey, Bermuda, the Cayman Islands, Switzerland and Turkey.

According to Le Maire, countries that made it onto this first tax haven blacklist might not be eligible to receive EU funds, in addition to other countermeasures that will be announced over the next few weeks.

As reported by The Guardian, of those countries included in the original blacklist, “Namibia was the only country on the blacklist who made no effort at all to correspond with the EU’s tax experts on the European council’s code of conduct (COC) group when issues were raised with the country’s government.”

Criticism Abounds for EU’s First Tax Haven Blacklist

Criticism Abounds for EU’s First Tax Haven Blacklist

Plenty of tax justice advocates, politicians and activists criticized the EU’s first attempt at developing a tax haven blacklist.

Oxfam’s Oli Pierce, an inequality and tax policy advisor, told the BBC: “It is disturbing to see mostly small countries on the EU blacklist, while the most notorious tax havens - UK-linked places like Bermuda, the Cayman Islands, Jersey and the Virgin Islands - escape with a place on the 'grey list'.”

"Although we recognise this is a step in the right direction, if EU leaders let too many tax havens off the hook we'll all lose out. A place on the grey list must not mean tax havens get off scot-free," Pierce added.

Oxfam also claimed, as explained by The Financial Times, that “if the criteria were applied to publicly available information the list should feature 35 countries including EU members Ireland, Luxembourg, the Netherlands and Malta.”

Tove Maria Ryding, tax coordinator the European Network on Debt and Development (Eurodad), agrees with this latter premise.

Ryding said, “If EU governments really wanted to get rid of tax havens, they should be open about the fact that several EU member states, such as Luxembourg, Ireland and the Netherlands, also have to fundamentally change their behavior.”

Additionally, both Tax Justice Network’s Alex Cobham and Green Party MEP Sven Giegold criticized the blacklist’s lack of bite.

Giegold called the blacklist “toothless” if the European Union “cannot agree on common sanctions against listed tax havens.”

Cobham said, “It is completely pointless to have a blacklist with no sanctions. Tax avoiders and the countries that sponsor them will all be letting out a sigh of relief today.”

Tax Justice Network’s Director also claimed the blacklist was merely a political exercise.

“Rather than have a list of tax havens based on an objective set of criteria, as originally envisaged, the list appears to be a political fix with EU members picking their least favourite countries to name and shame,” Cobham said.

South Korea, the UAE and Panama Respond to Inclusion in EU Tax Haven Blacklist

South Korea, the UAE and Panama Respond to Inclusion in EU Tax Haven Blacklist

Several countries included in the EU’s blacklist of tax haven hastily shot back at their inclusion.

South Korea’s government reacted to the news of its inclusion by declaring it an “infringement of taxation sovereignty” and a “violation of international standards.”

In a December 6th press release, the South Korean government said, “We proposed working with the EU to analyze the harmfulness of the programs in question and to consider improvements to those programs by mutual consent, but the EU included us on the list because we did not promise to revise or eliminate these programs by the end of 2018. For the EU to insist that a non-member state abide by EU standards constitutes a violation of taxation sovereignty.”

As explained by Bang Jun-ho for The Hankyoreh, South Korea was included as a result of the “Special Tax Treatment Control Act, which gives five to seven years of concessions on corporate and income tax for companies that set up shop in a free economic zone,” and failing to do anything to appease European officials.

The United Arab Emirates also attacked the EU’s decision, saying it was both “surprised and disappointed” at its inclusion.

The UAE’s Finance Under-Secretary, Younis Haji Al-Khouri, said, “The UAE has worked to meet the European Union’s requirements in terms of exchanging tax-related information.”

“We have committed to a reform process which will be finalised by October 2018, and we are absolutely confident this will ensure the UAE is swiftly removed from the list,” he added.

Al-Khouri reaffirmed that “the sole outstanding issue is the implementation of the Base erosion and profit shifting, BEPS, Minimum Standard, which we have committed to finalise by October 2018 and ratify by March 2019 – giving our federal structure sufficient time to allow for ratification across the seven Emirates.”

Additionally, Emirates Investment Bank’s CEO, Khaled Sifri, told Abu Dhabi’s The National that the blacklist was not “very credible… because they excluded many jurisdictions” and affirmed that “it will have no implications in the longer term.”

Panama, on the other hand, took things a step further and recalled their EU ambassador for consultations following its inclusion in the tax haven blacklist.

"Given the unfortunate incorporation of the country in this discriminatory list, the Republic of Panama has decided to call its Ambassador to the European Union, Dario Chiru, to assess the steps to be followed moving forward," said a statement by the Panamanian government.

What are your thoughts on the EU’s first attempt at developing a blacklist of non-cooperative tax jurisdictions? Does it seem fair? We’d love to hear your thoughts!

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