EU tax haven blacklist: A paper tiger in the making

Title photo © Kenneth Garcia

The European Union has been working on the idea of a so-called blacklist of tax havens (or non-cooperative jurisdictions in tax matters) since at least 2015. The February ECOFIN Council of EU Finance Ministers saw the final endorsement of the road-map and criteria towards establishing such a list by the end of 2017. With decisions on tax matters bound by unanimity among EU Member States and intense lobbying by the EU’s own tax havens going on behind closed doors, the Council outcome and prospect for the blacklist look unsurprisingly bleak (and are likely to fall far behind more realistic assessments such as OXFAM’s December 2016 attempt).

We had criticised the process and expected outcome of the tax haven blacklisting exercise already in December when it was presented to the PANA committee in a hearing with Commissioner Moscovici. EU tax havens will by definition be excluded from the list as it only targets third countries. The final assessment of third countries will be made in the secretive Council Code of Conduct group which the European Parliament criticised heavily in the LuxLeaks committee report as well as in yesterday’s plenary debate. Several important elements like the race to the bottom in tax rates, or the very damaging secrecy provisions of US states like Delaware and Nevada, are firmly excluded from the assessment. And any final decision is taken by unanimity giving veto power to all of the EU tax havens.

Since after the February Council decision, internal discussions have continued between member states, notably about the sanctions eventually to be applied to blacklisted jurisdictions. Here again it becomes clear that for many member states, the fight against tax havens is about showing that something is done rather than finding an effective solution to the problem. France, for instance, was isolated in calling for strong and binding sanctions to be applied jointly by all EU member states against blacklisted jurisdictions.

Most other member states favoured more “flexibility” meaning a minimum solution at EU level – that supposedly would not hurt very much – and the mere possibility for individual member states to go beyond this. Evidently, this would create a loopholed patchwork in which profit transfers out of the EU are operated from those member states which apply the least restrictions on tax havens, exactly as already is the case today.