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21st Apr 2019

EU blacklists 17 tax havens, avoids sanctions

  • Bermuda and seven other entities were given three more months to promise to fight tax evasion and tax avoidance, due to recent hurricanes (Photo: Mike Oropeza)

The EU adopted on Tuesday (5 December) a blacklist of 17 tax havens and a 'grey list' of 44 countries and jurisdictions that will have to take measures against tax evasion and tax avoidance, but it stopped short of planning sanctions.

The blacklist agreed by finance ministers includes American Samoa, Bahrain, Barbados, Grenada, Guam, Korea, Macao the Marshal Islands, Mongolia, Namibia, Palau, Panama, Santa Lucia, Samoa Trinidad and Tobago, Tunisia, and United Arab Emirates.

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The second list includes countries like EU candidates Turkey, Serbia and Montenegro, as well as Switzerland, Bosnia and Herzegovina, Macedonia, Morocco, Thailand, Vietnam and Hong Kong.

It also includes entities that are considered as being among the main tax havens but which have promised to change their legislation: Bermuda, the Cayman Islands as well as UK-associated Jersey, Guernsey and the Isle of Man.

Eight countries and territories recently hit by hurricanes - Antigua and Barbuda, Anguilla, Bahamas, British Virgin Islands, Dominica, St Kitts and Nevis, Turks and Caicos, US Virgin Islands - were given a grace period until February to come up with commitments.

The two lists "will help to increase the transparency of the global tax environment," Estonian finance minister Toomas Toniste, who chaired the meeting, told journalists.

Grey list

After months of talks in the secretive code of conduct expert group, the lists were changed until the last minute following agreements with and commitments from screened countries.



EU experts looked at 92 countries, before the list of non-cooperative entities was taken down to about 50.

Work accelerated in recent weeks, after the Paradise Papers revelations increased public pressure to take action.

"We've done in two months what would have been done in eight-nine months otherwise," an diplomat noted ahead of the meeting.

"I'm glad that many jurisdictions have taken this very seriously and are willing to cooperate in order to avoid being listed," Toniste said.

The fact that the blacklist includes only 11 countries and territories can be seen as a "success," an EU source told EUobserver - who admitted however that the real test will be how the grey list countries behave in the future.

"I would have preferred that it is called the 'orange list'," the source said. "It would have made clear that they can get a red light or a green light according to what they do next."

The grey list entities pledged to take measures required by the EU such as more transparency, exchange of information or fairer taxations and have one year - two years for developing countries - to implement them.

Countries that fail to meet their promises could end up on the blacklist, but EU ministers did not discuss whether sanctions could be taken.

New norm

For the EU, publishing the list at Tuesday's meeting, just a month after the publication of the Paradise Papers, was the priority, while some member states like Malta, Luxembourg or the UK did not want to consider sanctions.

"If someone wants additional sanctions, they can talk about it. But one should not underestimate the effect of a black list," said Luxembourg's Pierre Gramegna.

Toniste, speaking as the EU rotating presidency, assured that it would not be "just 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," he said in a statement.

"Stronger measures would have been preferable," European Commission vice president Valdis Dombrovskis said after the meeting, as the commission had been insisting that sanctions would make the list "credible".

"We hope this work will continue," he said.

His tax colleague Pierre Moscovici said that the commission will come up "in the coming weeks with a proposal for an EU level approach" and called on member states to "take their responsibilities" and "coordinate sanctions".

French minister Bruno Le Maire noted that designing sanctions would be a "question of credibility" for the EU's anti-tax havens action.

He said however that Tuesday's decision showed "political courage" because the EU did not hesitate to blacklist countries that are "close to the EU".

'No tax haven in the EU'

"It seems the EU's pressure has obliged some of the most notorious tax havens like Switzerland and Bermuda to commit to reforms," said Aurore Chardonnet, from the Oxfam NGO.

"However, placing countries on a 'grey list' shouldn't just be a way of letting them off the hook," she said in a statement, asking the EU "to make sure governments on the grey list follow up on their commitments".

Tove Maria Ryding, from Eurodad, another NGO, said that the list "looks like an attempt to divert attention away from the fact that EU governments have failed to clean up their own house".

"The EU itself is central to the tax haven problem, and many European countries have tax structures that multinationals can use to avoid taxes – that's deeply concerning," she said in a statement.

"There is no tax haven in the EU," Moscovici assured, insisting that EU member states "respect international standards".

He admitted however that some practices should be "prohibited" or "fought" in some member states.

MEPs ponder how to fight tax havens

After the Paradise Papers brought new revelations about tax dodging across the globe, including in the EU, the European Parliament wonders how to step up the fight.

EU commission wants 'credible' tax haven blacklist

The EU's finance commissioner Pierre Moscovici told reporters that he wants a credible EU blacklist of tax havens following the latest media tax avoidance revelations of the wealthy elite in the Paradise Papers.

EU states loosen grip on tax havens

Finance ministers removed eight entities from the tax havens blacklist, while ruling out more transparency or sanctions - prompting criticism from tax-campaigning NGOs such as Oxfam.

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