Wednesday

26th Jun 2019

Opinion

The EU's tax haven blacklist - impressive or impotent?

  • Luxembourg: How successful has the EU's tax havens blacklist really been? (Photo: Cesar Poyatos)

One year ago (5 December), the European Union published its first ever blacklist of tax havens. This was an assertive move against the ever-growing power of multinationals and private billionaires by an emboldened EU.

As a result of this pressure, many notorious tax havens committed to reform their tax laws before the end of 2018, and companies started moving away from tropical zero-tax islands.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

However, if the blacklist is to remain a relevant tool in the fight against tax avoidance, the EU must follow up on its first steps.

A preliminary analysis by Oxfam shows that, with just one month left to the deadline, at least 20 countries have failed to deliver sufficient reforms and could be blacklisted very soon, including heavyweights like Switzerland.

It is crucial that EU governments help end the era of tax havens to ensure the billions currently hidden from public coffers are spent on services which matter to European citizens - health, education, infrastructure, and development.

The economist Gabriel Zucman estimates that multinational companies shift as much as 40 percent of their global profits to tax havens every year. This deprives governments and citizens in the EU of €50bn to €70bn per annum, while developing countries loose at least $100bn (€88bn) during the same period - fuelling inequality and poverty.

So how successful has the EU's tax havens blacklist really been? Has it helped or hindered the fight against inequality?

Has it helped?

Last December, the EU started the blacklist with 17 tax havens. Since then, the list has dwindled to a paltry five countries - all small island states.

At the same time, a 'grey list' of countries that committed to reform their tax systems by the end of 2018 has grown. This list includes many of the most disreputable tax havens, like Bermuda and the Cayman Islands.

The 'grey list' is a clear success for the EU. For example, Liechtenstein was removed after ending the damaging tax practices that the EU had identified.

The blacklisting process has provoked changes in the way multinationals are operating. Big companies are beginning to move from tropical islands where they pay no tax, to countries where they pay extremely low tax.

US multinationals are changing their tax structures and leaving Bermuda and the Cayman Islands for countries like Ireland and Singapore which make use of weak international standards.

This trend is known as "onshoring" or "the tax haven shuffle", and it happens when zero-tax tropical islands change their tax regimes in response to external trends - in this case following pressure on tax havens from the EU.

Order in own house

For real impact, the EU must also tackle tax havens within its own territory.

Last year, Oxfam revealed that if the EU applied its own criteria for blacklisting to its member states, four countries would qualify - the Netherlands, Malta, Ireland, and Luxembourg.

Some months later, the European Commission openly criticised seven EU member states for their aggressive tax practices. But words are not enough.

On paper, Europe remains the region with the lowest average corporate tax rate in the world, and harmful tax incentives like patent boxes - which allow companies to avoid tax on intellectual property rights - are widespread.

This makes it easy for multinational companies to avoid paying their fair share, leaving governments in both the EU and elsewhere without the resources they urgently need.

There are four steps the EU should take to help end tax dodging.

Firstly, the EU must urgently put its own house in order to become a genuinely credible player in the fight against tax havens.

Secondly, the EU must make sure it blacklists all countries currently on the 'grey list' that fail to deliver the reforms they have committed to by the deadline. This should be done when the lists are reviewed in early 2019.

Thirdly, the EU must agree on effective sanctions against tax havens on its blacklist. Naming and shaming countries is a crucial first step, but it is not enough to end tax dodging.

Lastly, the EU should expand the criteria it uses to define fair taxation, so it bans harmful tax practices like patent boxes.

It is time for our governments to deliver on their promises.

Years of austerity and a faltering economic model have widened the gap between rich and poor in Europe, contributing to increasingly polarised societies and plunging the EU into crisis.

Meanwhile, the World Bank estimates that 736 million people worldwide live in extreme poverty, with limited access to health, education and the basic services proven to reduce inequality.

The EU must end tax havens - including those in its own backyard - and follow up on the blacklist to help create a world where all companies pay their fair share of tax, to the benefit of all people.

Marissa Ryan is head of the Oxfam EU advocacy office

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Luxembourg not a tax haven, claims PM

The prime minister of Luxembourg, Xavier Bettel, maintains that his country had broken no rules and committed no crime when issuing rulings that slashed global tax bills for the big firms.

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.

News in Brief

  1. EU universities to share students, curricula
  2. Migrant rescue ship loses Human Rights Court appeal
  3. Denmark completes social democrat sweep of Nordics
  4. Johnson offers 'do or die' pledge on Brexit
  5. Weber indirectly attacks Macron in newspaper op-ed
  6. EU to sign free trade deal with Vietnam
  7. EU funding of air traffic control 'largely unnecessary'
  8. Share trading ban looms as Swiss row with EU escalates

Six takeaways on digital disinformation at EU elections

For example, Germany's primetime TV news reported that 47 percent of political social media discussions were related to the extreme-right AfD party, when in fact this was the case only for Twitter - used by only four percent of Germans.

Stakeholders' Highlights

  1. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  2. Nordic Council of MinistersNo evidence that social media are harmful to young people
  3. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  4. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  5. Nordic Council of MinistersEducation gets refugees into work
  6. Counter BalanceSign the petition to help reform the EU’s Bank
  7. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  8. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  9. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  10. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  11. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  12. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate

Latest News

  1. EU moves to end car-testing 'confidentiality clause'
  2. EU parliament gives extra time for leaders on top jobs
  3. Europe's rights watchdog lifts Russia sanctions
  4. EU-Vietnam trade deal a bad day for workers' rights
  5. EU 'special envoy' going to US plan for Palestine
  6. Polish judicial reforms broke EU law, court says
  7. EU study: no evidence of 'East vs West' food discrimination
  8. Russia tried to stir up Irish troubles, US think tank says

Stakeholders' Highlights

  1. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  2. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  3. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  4. Nordic Council of MinistersNordic commitment to driving global gender equality
  5. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  6. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  7. Nordic Council of MinistersNordic talks on parental leave at the UN
  8. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  9. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  10. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  11. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  12. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson

Join EUobserver

Support quality EU news

Join us