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13th Apr 2024

Cayman Islands put on tax-haven blacklist after Brexit

  • Critics say the EU's tax-haven blacklist ignores some of the biggest culprits (Photo: Oxfam)

British overseas territory the Cayman Islands has been placed on an EU tax-haven blacklist, along with Palau, Panama, and the Seychelles.

The latest decision made by finance ministers on Tuesday (18 February) follows the UK's departure last month from the European Union. Ministers say it was listed because investment funds based there do not reflect real economic activity.

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But when asked why it took almost three years for the Cayman Islands to be listed, the EU appeared to eschew the question - saying the main purpose of the blacklist was to create dialogue to improve tax governance on the islands.

"Through the creation of this list we wanted to encourage and I would say in a way enhance cooperation and coordination, [and] dialogue," Croatia's finance minister Zdravko Maric, who was speaking on the behalf the EU's rotating presidency, told reporters in Brussels.

Set up in 2017 in response to revelations of widespread tax evasion schemes, the blacklist now totals some 12 jurisdictions. The other listed territories include American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, US Virgin Islands, and Vanuatu.

Tax Justice Network, an NGO, estimates some €500bn is lost each year in dodged corporate tax. Last year, it ranked the Cayman Islands in the top-ten corporate tax havens in the world.

World's biggest still off the hook

But critics say the EU blacklist still neglects the biggest tax-evading jurisdictions.

Oxfam, an international NGO, said it should have included the Bahamas, Bermuda and the British Virgin Island.

It notes all three offer zero-tax rates, or very low tax rates, so that companies avoid paying their fair share in corporate taxes.

In addition, it says some 30 percent of the $600bn [€555bn] in profits made by foreign multinationals in 2015 were shifted into EU member state tax-havens like Ireland, Luxembourg and the Netherlands.

When pressed about the exemption of EU states, Maric said national legislation is supposed to be in place. "All the legislation in respect to the tax system is supposed to be fully aligned," he said of the member states.

He further noted that the tax systems of 95 countries had been examined, with most of them complying with the EU standards. Another 120 harmful tax regimes have also been eliminated because of the oversight, he said.

But some, like Sven Giegold, a German Green MEP, said both Turkey and the United States should also have made the list anyway.

"The USA in particular is inviting tax evasion via anonymous letterbox companies and depots," he said, in a statement.

The EU blacklist aims to shame those who neglect good tax governance, impose greater scrutiny on financial transactions, and limit access to the EU funds. The list is set to be reviewed again in October.

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