For the first time, after months of screening and dialogue, the European Council has published its blacklist in a move to clamp down on tax fraud and evasion.
Black and grey
The list does not include any British overseas territory or crown dependency, however four are included on a “grey” list, meaning they have effectively been put on notice.
These include Bermuda, the Cayman Islands, the Isle of Man and Jersey.
Several island jurisdictions, including those named above, successfully made last ditch efforts in November to avoid being blacklisted.
The 17 states blacklisted are American Samoa, Bahrain, Barbados, Grenada, Guam, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, South Korea, Trinidad and Tobago, Tunisia and the United Arab Emirates.
The Council had been conducting a screening process with a large number of third country jurisdictions throughout 2017.
“Those that appear on the list failed to take meaningful action to address deficiencies identified and did not engage in a meaningful dialogue on the basis of the EU’s criteria,” the Council said.
“They made no such commitment at a high political level in time for the Council meeting.”
Toomas Toniste, minister for finance of Estonia, which currently holds the EU Council presidency, said the blacklist is not a one-off process.
“We will regularly review and update the list in the years to come. Our aim is to ensure that good tax governance becomes the new norm,” Toniste said.
Still no sanctions
Despite the naming and shaming, the EU has not implemented any direct sanctions against the 17 nations listed.
Instead, the EU Council only went as far to say that EU and member states “could apply defensive measures”.
“Including both taxation measures and measures outside the field of taxation, these measures would be aimed at preventing the erosion of the EU member states’ tax bases.”
The Council lists several defensive measure “guidelines” an EU nation could take under its own national law against a blacklisted country.
These include increased monitoring of certain transactions and auditing, special documentation requirements and mandatory disclosure disclosure of tax schemes with respect to cross-border arrangements.
List’s credibility questioned
Despite welcoming and supporting the EU’s move to establish a joint blacklist, Oxfam said the list would lose all credibility if it did not include EU countries.
In compiling its own version of the blacklist, Oxfam assessed countries against the EU’s three criteria: transparency, fair taxation and participation in international fora on tax.
In doing so, Oxfam said it identified 35 non-EU jurisdictions that fail to meet at least one requirement.
In addition, it concluded that Ireland, Luxembourg, Malta and the Netherlands all failed to meet the same, single criterion: fair taxation.
Interestingly, this is the sole criterion the UAE failed, which has landed it on the EU’s blacklist.
Many have also taken to social media to criticise the list, including the managing director of Arton Capital who tweeted the list was “total and complete nonsense”.
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