EU moving toward common ‘blacklist’ of tax havens

EU member states sent a letter to 92 countries on Wednesday (1 February) informing them that they will be “screened” with a view to inclusion in a future “blacklist” of tax havens.

The list of the countries that have been contacted is not public, but EUobserver understands that it is largely based on preliminary research done by the European Commission in September 2016.

That would mean it probably includes countries such as Canada, Bermuda, Israel, and the United States.

Developing countries with important financial centres, such as Mauritius, also likely feature to on the list, as well as some UK dependencies such as Jersey, Guernsey, and the Isle of Man.

In the letter, member states insisted that this first contact does not mean that the 92 countries will end up on the final list.

“It should be emphasised that the selection of jurisdictions for the 2017 screening process was based on a set of objective indicators (such as strength of economic ties with the EU, financial activity and stability factors) and that this selection does not prejudge the outcome of this process,” said one version of the letter, seen by EUobserver.
Zero corporate rate
Member states’ experts now have to examine the 92 countries, and possibly to engage in a “dialogue” with each of them, to decide whether they should figure on the final list.

This might be complicated, as member states have no definitive agreement on the criteria that will determine whether a country appears on the blacklist.

At a meeting in November 2016, EU finance ministers agreed that to avoid being on the future blacklist, third countries would have to comply with international transparency standards, avoid “preferential tax measures” or rules facilitating “offshore structures”, and implement a global plan against tax avoidance drawn up by the OECD, a club of industrialised states.

But they could not agree whether a “zero or almost zero” corporate tax rate was a measure facilitating “offshore structures”.

“Member states generally agree that the absence of a corporate tax system, zero or almost zero rate of taxation does not automatically mean that a jurisdiction encourages offshore activities,” says an internal EU working document on the issue seen by EUobserver.

“However, there is evidence that jurisdictions that facilitate offshore structures or arrangements typically have no or very low corporate income tax and that they capture large amounts of financial flows.”

Experts were supposed to solve this issue in January, but the decision has been pushed back to a technical meeting due to take place on Friday (3 February).

Time running out
Asked why they did not wait to have an agreement before sending the letter, officials answered that they wanted to move forward rapidly.

The list needs to be finalised by the end of the year, and experts also have to decide the measures that will be taken against jurisdictions that end up on the list.

“We have to keep the process moving,” said an EU source. “The zero corporate tax rate is only a detail, compared to what has already been agreed.”