Continuing our coverage of the EU Tax Haven Blacklist, we are reposting this article which first appeared in Public Finance International. The original can be found here: http://www.publicfinanceinternational.org/opinion/2017/12/eu-tax-blacklist-whitewash

The EU tax blacklist is a whitewash

By: George Turner

The EU’s tax blacklist is just another toothless, empty list, argues George Turner of the Tax Justice Network.

If we are to take action against tax havens, we need to some sort of definition of what a tax haven is, so that we can identify which jurisdictions should be the target of anti-tax haven policies.

That is the idea behind the EU’s so called ‘blacklist’ of tax havens released this week. The purpose was to create a common list so that the EU could implement policies mitigating the damaging impacts tax havens have on the finance sector and the public purse.

The EU is not the first to come up with a list of tax havens, and previous attempts have varied between useless and farcical.

In 2002 the OECD issued a list of uncooperative tax havens. The list contained just seven names. That list was reduced to five in 2003, three in 2007 and 0 in 2009. Inclusion on the OECD list did not carry sanctions with it.

The OECD has since persisted with its policy of creating empty blacklists and in 2017 released another list with just one country on it, Trinidad and Tobago. There has been a huge amount of research into tax havens since the early 2000s such as IMF analysis and Tax Justice Network’s own research demonstrating that profit shifting by multinational companies is costing between $500-$600bn a year, as well as the Paradise Papers leaks. In the light of this, the OECD position continues to be absurd.

In contrast, the EU effort could have been a big step forward. From the beginning the intention of the EU was to create a list with teeth, with real sanctions being applied to countries that found themselves meeting the EU tax haven test. And the test was more ambitious. Instead of vague commitments to sign up to low minimum standards from the OECD, the EU would look at a range of harmful and abusive tax practices.

However, the release of the list has been an anti-climax. To begin with, there is still no agreement from EU states on sanctions, something which was supposed to be agreed before the EU started its process of assessing countries. The list that has been published comes with few, if any consequences. Then there was the decision to split the list in two, a blacklist of non-cooperative jurisdictions, and a greylist – a list of countries that didn’t meet the standards set by the EU, but promised to do better. That further watered down the impact.

Then there was the publication of the list itself. Ahead of the release of the list, Tax Justice Network conducted its own analysis which found that 41 countries should be listed were the EU to apply its own criteria strictly. The list published by the EU this week contained just 17 countries. Tunisia and Namibia were included, whilst well known tax havens such as Bermuda and Jersey, two jurisdictions at the heart of the Paradise Papers, were in the grey.

Few people seem satisfied with the result of the blacklist – including Pierre Moscovici, the EU commissioner with the responsibility for it. Speaking after the meeting of European finance ministers that agreed the list he called it an ‘insufficient response’ and called for agreement on sanctions to be brought forward.

One of the issues the EU faces is that a number of its own members – the UK, Ireland, Malta, Cyprus, Luxembourg and the Netherlands – are all playing the game themselves. Putting in place aggressive tax policies designed to pinch profits made abroad. They have little interest in the EU taking a strong stance against tax havens, and some of these governments have lobbied for years to water down the EU’s efforts.

So how do we end this endless circle of public outrage, followed by the production of empty, toothless blacklists? The EU first needs to sort out its own affairs, getting agreement from its member states on ending their own unfair tax practices, before dealing with the rest of the world. The Common Consolidated Corporate Tax Base, and Brexit, present an opportunity to do this.

Photo European Parliament – © European Union 2013 – European Parliament. (Attribution-NonCommercial-NoDerivs Creative Commons license).