EU method of drafting tax blacklists to be investigated
14 Feb 2018

Something is wrong with the way the EU drafts tax blacklists of states which have poor transparency initiatives, European parliamentarians say, and they want to get to the bottom of the issue.

The lists originate from efforts within the bloc to crackdown on financial crime, including tax evasion and avoidance.

After much haggling, member states eventually came up with the tax blacklists, which were published by the European Council in December last year, and updated a month later in January, when the European Council announced that it would remove half the states on the list.

According to the European Commission, the screening process was led by EU Member States, who nominated national tax experts to screen the tax systems of the selected third countries.

These experts were grouped into panels, which examined the jurisdictions against the agreed criteria.

In November 2016, the European Council established criteria stating that a jurisdiction should be compliant on tax transparency, fair taxation and anti-BEPS (tax base erosion and profit shifting) measures.

Some European lawmakers (MEPs) have, however, strongly disapproved the bloc’s screening and selection process, and want ‘redress.’

Last week, parliamentarians agreed to investigate the method of drafting these tax blacklists as part of a new committee formed to look into financial crime and other related matters in the EU.

Called TAXE 3, the special committee will also look into the Paradise Papers, VAT fraud and other issues.

German MEP Sven Giegold said: “The EU’s new blacklist of tax havens lacks credibility and transparency. We will demand unrestricted access to all documents concerning the review of third countries. We will examine whether some countries or territories have received unjustified special treatment.”

“We must also closely monitor the creation of the EU’s tightened blacklist of non-cooperative money laundering territories. The mistakes of the blacklist of EU tax havens must not be repeated. It is totally unacceptable that the EU’s blacklists lack the most important shadow financial institutions.”

According to text agreed on in the European Parliament (EP), the special committee shall be vested with powers to “assess the Commission’s own assessment and screening process for listing countries in the AMLD delegated act on high-risk third countries.”

It will also “assess the methodology, the country screening and the impact of the EU list of non-cooperative jurisdictions for tax purposes ( EU black list of tax havens) as well as the removal of countries form the list and sanctions adopted towards listed countries.”

In response to the development and the lawmakers’ demands, an EU official said: “The Council has taken action to establish an EU list of non-cooperative jurisdictions because it takes seriously the issue of tax fraud, tax evasion and tax avoidance. The list is a new type of action and it clearly carries added value;”

“The Council has [also] delivered on its pledge to issue an “EU list of non-cooperative jurisdictions”, as indicated in its conclusions of May 2016. It has never been the objective to have a “blacklist of tax havens.”

The official said details of the Council’s conclusions on the matter can be located on its website.

Background

The lists comprise a blacklist made up of ‘non-cooperative’ tax jurisdictions.

Those that appear on the list have failed to take ‘meaningful’ action to address deficiencies in their tax laws or policies identified by the EU, and have not engaged in ‘meaningful’ dialogue on the basis of the EU’s criteria.

The other list is the grey list, comprising numerous countries which the EU said are ‘committed to improving their transparency standards.’

Initially, the blacklist comprised 17 countries when it was published in December – American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.

However, last month the European Council announced that it would remove the following eight jurisdictions ‘following commitments made at a high political level to remedy EU concerns’ – Barbados, Grenada, the Republic of Korea, Macao SAR, Mongolia, Panama, Tunisia and the United Arab Emirates.

These eight states were moved on to the grey list, which in December comprised 47 countries, including Hong Kong SAR, Jordan, Liechtenstein, Maldives, Switzerland, Taiwan, Thailand and Turkey.

Irene Madongo

This article was updated on 19 February 2018 to include the comments of an EU official regarding the Council’s position.

Read more:

EU publishes black list of non-cooperative jurisdictions

EU official ‘justifies’ decision to remove half of countries from blacklist

New EU tax blacklist and grey list – here’s what you need to know

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