European Union considers Panama, S Korea for tax haven blacklist

Henrietta Brewer
December 7, 2017

The blacklisted countries are accused of behaving like tax havens.

"It's appalling and unacceptable to put your money in a tax haven in order to avoid paying taxes, so I'm very pleased that the blacklist for tax havens sends a clear signal in co-operation with other European Union nations", said the tax minister, Karsten Lauritzen. "No state should escape responsibilities when it doesn't firmly combat tax evasion", French Finance Minister Bruno Le Maire said on his way to the meeting where the blacklist was approved.

The move was hailed as a vital "first step" but the failure of the member states to agree on any sanctions for those on the blacklist provoked the European commissioner for economic and financial affairs, Pierre Moscovici, to concede it was as yet "an insufficient response".

The 17 countries that could potentially face sanctions for failing to bring their standards in line with the EU's published requirements, are South Korea, Panama, Bahrain, Tunisia, United Arab Emirates, as well as Barbados, Samoa, American Samoa, Grenada, Guam, Macau, the Marshall Islands, Mongolia, Namibia, Palau, St. Lucia and Trinidad and Tobago, according to an ECOFIN announcement. The countries omitted from consideration were Anguilla, Antigua and Barbuda, Bahamas, British Virgin Islands, Dominica, St Kitts and Nevis, Turks and Caicos, and US Virgin Islands.

The list was made on the basis of three main components: tax transparency, fair tax competition and implementation of Base Erosion and Profit Shifting (BEPS), which is a way of battling tax avoidance created by the OECD.

The Council concluded that these countries are non-cooperative jurisdictions for tax purposes because they did not meet Council criteria established in November 2016 and did not provide a sufficient commitment to meet these criteria in the future. It justified this by saying the list is specifically focused on external threats, adding that internal procedures are already in place to make sure tax policy within the bloc is fair and transparent.

The EU has struggled for more than a year to finalise the list, with smaller, low-tax EU nations such as Ireland, Malta and Luxembourg anxious that it may scare off multinationals. Among them are Switzerland, Morocco, Turkey, Qatar, Thailand and Hong Kong.

The announcement comes less than a month after the publication of the Paradise Papers, a global leak containing information about individuals and companies holding offshore finances. Some large companies - including Apple, General Electric, and others - often stash billions of dollars overseas in tax havens, like Luxembourg and the Cayman Islands, so they can effectively defer payment of their taxes.

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