The EU has named and shamed 17 countries in its first ever tax haven blacklist and put a further 47 on notice, including British overseas territories and the crown dependencies of Jersey, Guernsey and the Isle of Man, in an attempt to clamp down on the estimated £506bn lost to aggressive avoidance every year.
The move was hailed as a vital “first step” but the failure of the member states to agree on any sanctions for those on the blacklist provoked the European commissioner for economic and financial affairs, Pierre Moscovici, to concede it was as yet “an insufficient response”.
The blacklist includes South Korea, Mongolia, Namibia, Panama, Trinidad & Tobago, Bahrain and the United Arab Emirates.
Guam, the US territory in the Pacific, also features on the blacklist, in a move that is unlikely to endear Brussels to Donald Trump’s White House.
The EU said the countries failed to match up to international standards and had not offered sufficient commitments that they would change their ways during talks in the months leading up to publication of the list.
Of the jurisdictions with links to the UK – Bermuda and the Cayman Islands, along with Guernsey, Jersey and the Isle of Man – have been placed on a so-called “grey list” who have committed to reform their tax structures to ensure, for example, that firms are not simply using their 0% corporate tax rates to shield their profits.
It is understood the British government tried and failed to ensure those jurisdictions would not be screened by the EU’s tax experts but was overruled. A further eight jurisdictions affected by recent hurricanes will be addressed in February.
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.
The others on the blacklist are: American Samoa, Barbados, Grenada, Macau, the Marshall Islands, Palau, St Lucia, Samoa and Tunisia.
The blacklist will be linked to EU legislation so that jurisdictions implicated will not be eligible for funds from the bloc except where it is to aid development.
However, hopes that the member states would come to an agreement on further sanctions, including a withholding tax on money going to the listed countries, were dashed at a meeting of finance ministers in Brussels.
Moscovici called on the member states to individually devise sanctions. “This list represents substantial progress. Its 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.
“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.”
The former French minister for the economy, added: “Europe has taken a step forward, but the fight against tax havens must continue unabated. In order to do this, I expect the member states to set a precise timetable: in three months’ time, we will have to examine the situation of the countries affected by hurricanes.
“In six months’ time, we will have to review all the commitments made. Tax havens must not slip off Europe’s radar screen. Countries that are not on the blacklist will only be fully off the hook once they have fulfilled their commitments.
“As a European citizen, I share the expectations of those who hoped for more. I say to them, let us take this list for what it is: a first step. And let us keep up the pressure together, on the Member States and on third countries.”
Developed countries on the “grey list” have until the end of 2018 to deliver on their commitments to reform while developing countries have been given an additional year before they will be put on the blacklist.
The EU-named tax havens
The UK Treasury said: “Today’s publication marks an important step in our ongoing efforts to tackle tax avoidance and evasion internationally. This is clearly working, as over 40 jurisdictions have made significant commitments to reform as part of this process. For those that are on today’s list, we hope that this increased scrutiny and the potential for counter-measures will lead them to reconsider their approach.”
However, Aurore Chardonnet, Oxfam’s EU policy adviser on inequality and tax, voiced concerns that the bloc had so far picked only on smaller countries.
She 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. If the EU were to apply its own criteria to member states, even four EU countries would be blacklisted. 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.”
The UK shadow Treasury minister, Anneliese Dodds MP, said: “It is disappointing to see UK overseas territories and crown dependencies mentioned as ‘on notice’ from the EU in its tax haven blacklist. The British government said back in April that it would require Overseas Territories and Crown Dependencies to produce registers of beneficial ownership which would be accessible to HMRC.
“Although some have complied, other have not. Just as the UK’s own beneficial ownership register has been criticised for apparently missing some companies which it should include, so here we see a case of faulty implementation by the British government and a lack of political will to prioritise stopping tax dodging.
“I should add that the British government has not earned itself many allies by trying to protect certain jurisdictions during this process. Ultimately it is in the interests of all to have more tax transparency and action against money laundering and aggressive tax avoidance.”