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| Is the EU tax haven blacklist a whitewash? | Is the EU tax haven blacklist a whitewash? |
| (about 1 month later) | |
| Dismissed in some quarters as a “missed opportunity for leadership” and a “whitewash”, Tuesday’s publication of the European Union’s first tax haven blacklist has not cheered those who were hoping for a crackdown. | Dismissed in some quarters as a “missed opportunity for leadership” and a “whitewash”, Tuesday’s publication of the European Union’s first tax haven blacklist has not cheered those who were hoping for a crackdown. |
| At first glance this is a victory for the offshore lobby, who have been fighting to keep the worst offenders, many of them British dependencies, outside of the hall of shame. | At first glance this is a victory for the offshore lobby, who have been fighting to keep the worst offenders, many of them British dependencies, outside of the hall of shame. |
| Not one of the nine UK territories that made an earlier longlist has been called out. Hurricane damage means the British Virgin Islands, Anguilla and Turks & Caicos are in a group of eight that have until February to get their house in order. | Not one of the nine UK territories that made an earlier longlist has been called out. Hurricane damage means the British Virgin Islands, Anguilla and Turks & Caicos are in a group of eight that have until February to get their house in order. |
| The list of non-cooperative jurisdictions, to give this initiative its proper name, contains 17 entries. Many, such as Namibia, Mongolia and American Samoa, are small countries or isolated regimes without major powers to defend them. There are some notable exceptions: Panama is deservedly singled out, so too is the United Arab Emirates. | The list of non-cooperative jurisdictions, to give this initiative its proper name, contains 17 entries. Many, such as Namibia, Mongolia and American Samoa, are small countries or isolated regimes without major powers to defend them. There are some notable exceptions: Panama is deservedly singled out, so too is the United Arab Emirates. |
| But the real action is on an accompanying “grey list”. It contains 47 names, including the Cayman Islands, Vanuatu, Guernsey, Jersey, Bermuda and the Isle of Man. Followers of the Paradise Papers will have noticed the last two featured prominently in the latest revelations of offshore antics. All have a corporation tax rate of zero. | But the real action is on an accompanying “grey list”. It contains 47 names, including the Cayman Islands, Vanuatu, Guernsey, Jersey, Bermuda and the Isle of Man. Followers of the Paradise Papers will have noticed the last two featured prominently in the latest revelations of offshore antics. All have a corporation tax rate of zero. |
| The six named above have been singled out for failing a crucial test – fair taxation. In particular, these islands “facilitate offshore structures which attract profits without real economic activity”. Their laws allow companies to book profits without ever really doing business on their shores. These sorts of laws have allowed trillions in untaxed earnings to be syphoned out of Europe’s big consumer markets. Think of the sportswear brand Nike, which used Bermuda and the Netherlands to amass a $12bn offshore cash pile. | The six named above have been singled out for failing a crucial test – fair taxation. In particular, these islands “facilitate offshore structures which attract profits without real economic activity”. Their laws allow companies to book profits without ever really doing business on their shores. These sorts of laws have allowed trillions in untaxed earnings to be syphoned out of Europe’s big consumer markets. Think of the sportswear brand Nike, which used Bermuda and the Netherlands to amass a $12bn offshore cash pile. |
| Greylist members have promised to address tax fairness, transparency and other issues. They have until the end of 2018 to do so. Progress will be monitored by an obscure entity called the European code of conduct group on business taxation, which is made up of tax experts from member states and chaired by the Italian mandarin Fabrizia Lapecorella. | Greylist members have promised to address tax fairness, transparency and other issues. They have until the end of 2018 to do so. Progress will be monitored by an obscure entity called the European code of conduct group on business taxation, which is made up of tax experts from member states and chaired by the Italian mandarin Fabrizia Lapecorella. |
| If improvements don’t materialise, these jurisdictions could be added to the blacklist, which is set to be updated annually. So, what are the penalties for being blacklisted? | If improvements don’t materialise, these jurisdictions could be added to the blacklist, which is set to be updated annually. So, what are the penalties for being blacklisted? |
| Unfortunately, none have been agreed. Pierre Moscovici, the French politician who has led this initiative in his role as finance commissioner in Brussels, is urging member states to pick and choose from a menu of sanctions. | Unfortunately, none have been agreed. Pierre Moscovici, the French politician who has led this initiative in his role as finance commissioner in Brussels, is urging member states to pick and choose from a menu of sanctions. |
| The most draconian is withholding taxes: profits cannot leave a member state disguised as interest payments on a loan, or royalties, without being taxed in the market where they were made. At the other end of the scale, tax inspectors could decide to pay special attention to any structures involving these jurisdictions. Many probably already do so. | The most draconian is withholding taxes: profits cannot leave a member state disguised as interest payments on a loan, or royalties, without being taxed in the market where they were made. At the other end of the scale, tax inspectors could decide to pay special attention to any structures involving these jurisdictions. Many probably already do so. |
| Moscovici is encouraging member states to act unilaterally on sanctions if they cannot agree as a group. France, which has been calling for bigger contributions to state coffers by Google and Apple, may decide to bite. While this blacklist does not pose an immediate threat to tax havens, it is not without teeth. | Moscovici is encouraging member states to act unilaterally on sanctions if they cannot agree as a group. France, which has been calling for bigger contributions to state coffers by Google and Apple, may decide to bite. While this blacklist does not pose an immediate threat to tax havens, it is not without teeth. |
| Tax avoidance | Tax avoidance |
| Tax havens | Tax havens |
| European Union | European Union |
| Corporate governance | Corporate governance |
| Europe | Europe |
| Jersey | Jersey |
| analysis | analysis |
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