EU tax haven list ‘ineffective’
25 Jan 2021
The European Parliament has called the current EU list of tax havens ‘confusing and ineffective’, claiming it is not catching the worst offenders and should apply more stringent assessments
25 Jan 2021
MEPs called for a tightening of the rules on which countries are added or removed from the blacklist, and indicated that the Cayman Islands, Bahamas and Guernsey are among those which should not have been taken off the list.
They said criteria should be added to ensure that more countries are considered a tax haven and to prevent countries from being removed from the blacklist too hastily.
In a debate on the topic, MEPs said that while the EU’s list of tax havens, set up in 2017, has had a ‘positive impact’ so far but has failed to ‘live up to its full potential, [with] jurisdictions currently on the list covering less than 2% of worldwide tax revenue losses’.
A resolution in favour of tightening the criteria was adopted by 587 votes in favour, 50 against and 46 abstentions, with MEPs calling the current system ‘confusing and ineffective’ and supporting changes to make the process of listing or delisting a country more transparent, consistent and impartial.
The EU Parliament said that the criterion for judging if a country’s tax system is fair or not needs to be widened to include more practices and not only preferential tax rates, citing as an example the fact that the Cayman Islands has just been removed from the black list, while running a 0% tax rate policy.
Among other measures, the resolution proposes that all jurisdictions with a 0% corporate tax rate or with no taxes on companies’ profits should be automatically placed on the blacklist.
MEPs also warned against removing countries from the blacklist on the basis of ‘token tweaks’ to their jurisdiction’s tax system, arguing that for example the Cayman Islands and Bermuda were delisted after ‘very minimal’ changes and ‘weak enforcement measures’.
The European Parliament also said that all third countries need to be treated and screened fairly using the same criteria, arguing that the current list indicates that this is not the case. EU member states should be screened to see if they display any characteristics of a tax haven, and those falling foul should also be regarded as tax havens.
MEPs called for the process of establishing the list to be formalised through a legally binding instrument by the end of 2021 and questioned whether an informal body such as the Code of Conduct Group is able or suitable to update the blacklist.
Paul Tany, chair of the subcommittee on tax matters, said: ‘While the list can be a good tool, member states forgot something when composing it: actual tax havens.
‘The truth is, the list is not getting better, it's getting worse.
‘Guernsey, the Bahamas and now the Cayman Islands are only some of the well-known tax havens that member states have taken off the list.
‘In refusing to properly address tax avoidance, national governments are failing their citizens to the tune of over €140bn (£124bn). Especially in the current context, this is unacceptable.
‘That is why the parliament strongly condemns the recent delisting of the Cayman Islands and calls for more transparency and stricter listing criteria.
‘However, if we focus on others, we also need to look ourselves in the mirror. The picture is not pretty. EU countries are responsible for 36% of tax havens.’