Naomi Fowler ■ Will the EU really blacklist the United States?


In our latest Financial Secrecy Index assessment, the United States moved up to second place. With its now unparalleled commitment to secrecy at scale, and its influence on international reforms, it has become the leading driver of tax abuse and corruption risk around the world.

Years ago we called on the European Union to impose a withholding tax against jurisdictions that don’t meet the emerging global standards of tax transparency – starting with the United States. As the Tax Justice Network’s John Christensen said at the time,

While rightly demanding greater transparency from others, the USA has established itself as the fastest-growing provider of tax haven secrecy – and only the EU has the power to act. Otherwise we risk seeing a world where only the richest and most powerful country can protect its tax system from offshore abuse, while EU countries – not to mention developing countries – pay the price.”

As time went on, our call began to gather support. We wrote how

the ‘tax havens and corruption’ analysis that we first began to develop in detail in September 2006, initially to deaf ears, is now finally going mainstream.”

Then last month Bloomberg Tax reported what had once seemed unthinkable:

If the U.S. doesn’t agree by June 2019 to exchange the bank account details of non-U.S. citizens with governments around the world, it will be placed on the European Union’s tax haven blacklist.”

As you may know, we’re no cheerleaders for tax haven blacklists, for reasons we’ve written about extensively over the years – in short, they have always proved farcical and tainted by political considerations. For example, here’s our reaction to the EU’s blacklist announced at the end of 2017.

And while countries like the United States, so clearly a huge global offender have (until now) been left alone, there’s been what we think is an unfair targeting of smaller, less politically and economically powerful nations as you can see here with the EU’s blacklisting of Namibia, which may not comply with EU criteria for all kinds of reasons, including lack of resources available for compliance. And that’s causing real harm to Namibia’s economy with, for example, the company Meatco’s accounts frozen in the UK, which has “exported a combined 9 500 tonnes of beef to the EU, the United Kingdom and Norway.” As a Namibian Minister is quoted as saying here,

We don’t fall under the tax haven definition, which suggests that a tax jurisdiction receives money from abroad with the purpose of giving tax holidays…Namibia does not do that”

Yet, we have the United States, which has the resources but not the political will to comply, simply refusing to cooperate, whilst at the same demanding information exchange from other countries on money banked by its citizens overseas under it’s one way street system known as FATCA, the Foreign Account Tax Compliance Act.

Now the EU is telling the United States that it has until June 2019 to adopt the Organisation for Economic Cooperation’s common reporting standard. Valere Moutarlier, a director at the European Commission’s Directorate-General for Taxation and Customs Union has stated:

We have transparency criteria that is very clear that the June 2019 deadline must be respected”


The EU is currently drawing up a list of sanctions for blacklisted countries that include withholding taxes on multinational corporate group dividends.”

So, might this actually happen…? All eyes are on June 2019.

Apart from the fact that it’s unlikely that the Trump administration will oblige this EU deadline, the United States has a long history of not ratifying international agreements. To name but a few, the United Nations Convention on the Law of the Sea, the Rome Statute of the International Criminal Court, the Kyoto Protocol, the Convention on the Rights of the Child, the Ottawa Treaty, the Comprehensive Nuclear-Test-Ban Treaty, the Convention on the Elimination of All Forms of Discrimination against Women, the International Covenant on Economic, Social and Cultural Rights.

If the EU does make good its threat to blacklist the United States as a non-cooperative jurisdiction and sanctions are applied, the consequences could be pretty serious and wide-ranging.

But as our chief executive Alex Cobham told the same European Parliament committee hearings at which Valere Moutarlier (a director at the European Commission’s Directorate-General for Taxation and Customs Union) made his remarks, it will be crucial to design counter-measures that are effective against major non-cooperative jurisdictions, without imposing additional collateral damage on small, wrongly listed jurisdictions that cannot conceivably do harm to EU member states. One very obvious starting place, as he noted, would be to require public country-by-country reporting from all multinationals headquartered in non-cooperative jurisdictions.

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Comments • 1

  • Shawn Rogers
    December 5, 2018 - 10:50 am

    It would just be much easier for the US government and the world if the US empire throws FATCA in the trash, and replaced citizenship based taxation with a residency based taxation system like the rest of the civilized world.

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