EU tax haven blacklist is a whitewash

The European Commission and Council of Ministers have scored an own goal in the fight against tax avoidance by omitting EU member states from its own international blacklist on tax havens, published on December 5.

17 countries and areas are on the blacklist with a further ‘grey list’ for 47 nations which are “committed to automatic exchange of information” including Oman and Hong Kong. No EU country is on the list, however, even though some member states are amongst the worst offenders for allowing multinationals and individuals to exploit existing loopholes for tax avoidance.

The blacklist also excludes low-tax jurisdictions and a number of British Overseas Territories such as Bermuda and the Cayman Islands. Tax havens on the blacklist face potential sanctions by the EU.

Irish MEP Matt Carthy, GUE/NGL’s co-ccordinator on the Panama Papers committee, criticised both the secrecy and criteria used in the selection of the list.

“Many of us campaigning for international tax justice have looked at this blacklisting exercise with scepticism, noting the potential for the process to be highly politicised and, as a result, ineffectual as a measure to tackle tax havens and push them to reform,” he said.

“Just 17 jurisdictions are on this list, while notorious tax havens such as Bermuda and the Cayman Islands are not included. The automatic exclusion of EU member states from the blacklist of tax havens makes the end result a joke, as some of the member states of the EU are complicit in a huge proportion of the profit-shifting that takes place globally.

“Last week Oxfam released a report in which it found that at least 35 states should be on a tax haven blacklist, including EU states Ireland, Luxembourg, the Netherlands and Malta. In a separate report, the  Tax Justice Net also listed states Ireland, Luxembourg, the Netherlands and Malta, and added Britain and Cyprus as members of the EU that should be on the  blacklist using the European Commission’s own criteria.

“In addition to the automatic exclusion of EU member states, political lobbying by countries like Britain resulted in its dependencies not being included – because they successfully removed the criteria that having no corporate taxation in place indicated a jurisdiction was a tax haven. So you can have a tax rate of zero, like Bermuda, and yet not be considered a tax haven according to this list.”

Carthy said the process by which the jurisdictions were selected was not only highly politicised, but also highly secretive: “It has been virtually impossible to get any information on how this list has been developed.

“The Commission and the Council needs to release the documents and minutes of meetings where the selection process took place and the negotiations that saw some jurisdictions removed from the list. The commitments given to the EU by the so-called grey list of countries who have pledged to implement change in order to avoid being blacklisted also needs to be made public.

“The concept of creating a tax haven blacklist with sanctions is a useful one that has the potential to encourage reform internationally, so I welcome the creation of this list as a first step.

“But let’s not fool ourselves that the Commission’s politicised and secretive blacklist will be an effective tool at ending the offshore scam – it won’t be. EU members must commit to global and public country-by-country reporting for multinationals and to fully public beneficial ownership registers as immediate and more effective tools for fighting tax fraud and financial secrecy.”

GUE/NGL shadow rapporteur on the Panama Papers report, Miguel Urbán, also criticised the process and the resulting list, saying: “This blacklist does nothing but illustrate the complicity of the European Union in tax evasion.

“It has omitted all the tax havens that currently exist in the European Union – countries which would fail the Commission’s own criteria for tax evasion. In that respect, the list drawn up by GESTHA tax experts in Spain that includes 130 countries seems much more reliable.

“The European Union cannot lecture third countries to abide by its rules if its own house isn’t in order. There must be sanctions for member states that do not comply with EU’s minimum standards of fair taxation, collaboration and transparency,” argued Urbán.