EU finance ministers have blacklisted 17 countries for refusing to co-operate with its crackdown on tax havens but have welcomed reform promises from 47 other nations.
Announcing the outcome of months of screening of global tax policies, Brussels said its inaugural list of non-compliant nations was a step forward but admitted it was not enough. Campaigners against tax avoidance also said the EU’s blacklist would have little effect without sanctions or other financial penalties.
Panama, South Korea and the United Arab Emirates were all placed on the list of non-compliant jurisdictions. Countries that have said they will make reforms, including Switzerland, Turkey and Hong Kong, were added to a so-called “grey list”.
The blacklist — compiled by the European Council’s code of conduct group — was an “insufficient response to the scale of tax evasion worldwide”, said Pierre Moscovici, European commissioner for tax. He called for member states to “set a precise timetable” to examine the grey-listed countries’ commitments in six months time.
Current plans are to reconsider the list annually. Developed grey-list countries have one year to deliver on their reform promises while developing nations have two years.
Beyond being named, countries currently face few consequences from being blacklisted. Some EU funding legislation does include reference to the blacklist and the bloc’s finance ministers will discuss specific countermeasures next year.
“It is completely pointless to have a blacklist with no sanctions,” said Alex Cobham of the Tax Justice Network. “Tax avoiders and the countries that sponsor them will all be letting out a sigh of relief today.”
“As long as the Council cannot agree on common sanctions against listed tax havens, the blacklist will be toothless,” said MEP Sven Giegold, a Green party spokesman on financial and economic policy.
Aurore Chardonnet of the charity Oxfam said: “It seems the EU’s pressure has obliged some of the most notorious tax havens like Switzerland and Bermuda to commit to reforms?.?.?.?However, placing countries on a ‘grey list’ shouldn’t just be a way of letting them off the hook, as has happened with other blacklisting efforts in the past.”
The list is an important part of Europe’s decade-long tax crackdown on aggressive tax avoidance, in co-ordination with efforts led by the Organisation for Economic Co-operation and Development. International tax structures have been pushed up the agenda by a succession of leaked revelations about various jurisdictions, including the Lux leaks, Panama papers and Paradise papers.
Eight Caribbean countries that suffered extensive hurricane damage this year — Antigua and Barbuda, Anguilla, the Bahamas, the British Virgin Islands, Dominica, St Kitts and Nevis, Turks and Caicos and the US Virgin Islands — have been given extra time to respond to the EU’s request and do not appear on any list.
To stay off the list, countries must have fair tax rules, which the EU defines as not offering preferential measures or arrangements that enable companies to move profits to avoid levies. They must also meet transparency standards and implement anti-profit-shifting measures set by the OECD.
EU members were not screened but Oxfam said 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.
International authorities have previously published similar blacklists, but most have struggled for credibility. The OECD’s tax haven list published in June 2016 contained only one country — Trinidad & Tobago.
The 17 countries on the European list are American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, the Marshall Islands, Mongolia, Namibia, Palau, Panama, St Lucia, Samoa, Trinidad & Tobago, Tunisia and the UAE.