UK fights to keep crown dependencies off EU tax haven blacklist

Added 8th November 2016

The UK government is fighting to keep Guernsey, Jersey and other British overseas territories off the EU’s planned blacklist of offshore tax havens.

UK fights to keep crown dependencies off EU tax haven blacklist

According to The Guardian, David Gauke, chief secretary to the Treasury, will tell EU finance ministers at a meeting in Brussels on Tuesday, that the UK is against the European Commission (EC) putting territories such as Guernsey and Jersey – which have a zero rate of corporation tax – on a list of “non-cooperative” jurisdictions.

The EU vowed to draw up a blacklist of tax havens following the revelations in the Panama Papers, an unprecedented leak of 11.5m files from the database of the world’s fourth-biggest offshore law firm, Mossack Fonseca. The scandal exposed how the rich and famous use offshore tax haven to hide their wealth from tax authorities.

Brussels pledged to improve transparency on the shady “treasure islands” that help multinationals and wealthy clients avoid paying tax.

The UK government is negotiating to allow potential blacklistees more time to meet the EU criteria so that jurisdictions can be allowed until 2020 to meet all EU rules on transparency, rather than 2017.

‘Scoreboard’ of tax regimes

In September, the EC released a ‘scoreboard’ of 81 non-EU states to help identify countries located outside the EU that enable tax avoidance. Those listed will be scored against three criteria; strength of ties with the EU, financial activity and stability.

The document found that in addition to the Channel Islands, the Isle of Man and British overseas territories such as Bermuda and the Cayman Islands, are among the jurisdictions that have a zero rate of corporation tax, which Brussels officials believe should be red-flagged as “unfair taxation”.

However, the UK, Ireland, Sweden, the Baltic states, the Netherlands and Luxembourg are blocking the EU plan to blackball zero tax jurisdictions, arguing that the 28-member voting block has no right to penalise outside jurisdictions for setting their own tax rates.

In contrast, Germany and France think zero rates should automatically mean a country is deemed “unfair” on taxation and goes on to the blacklist.

IoM slams blacklist

Isle of Man chief minister Allan Bell has previously slammed the blacklist of non-EU tax regimes, saying the move is more to do with the “internal politics of Brussels” than greater transparency.

“Tax rates are matters for national governments and any move to list purely on the basis of tax rates runs counter to the international consensus.

“It is clear that this is not a blacklist. The Commission has instead chosen to create a long list of countries – which includes many members of the G20, including the US, China, Canada and Japan – for further examination.

Bell questioned the hypocrisy of the EU scoreboard, which fails to include EU countries such as Luxembourg and Germany, which have previously ranked higher on the Financial Secrecy Index ahead of countries like Panama.

In another example, despite being ranked first on the Financial Secrecy Index, Switzerland does not appear on the EU blacklist due to the nation’s own transparency agreements with the EU.

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About Author

Monira Matin

Senior Reporter

Monira joined International Adviser in March 2016 from Informa Global Markets where she worked as a eurobond reporter for over two years, covering fixed income markets. She has previously held a number of editorial positions covering politics, insurance and technology. Monira has a degree in Journalism and Economics from City University.


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