The EU has named 17 countries – including South Korea, Mongolia, Namibia, Panama, Trinidad & Tobago, Bahrain and the United Arab Emirates – in its first ever tax haven blacklist and put a further 47 on notice, including British overseas territories and the crown dependencies of Jersey, Guernsey and the Isle of Man, in an attempt to crack down on the estimated £506bn lost to tax avoidance every year. This followed the meeting of European Union ministers earlier this week to discuss the blacklist of non-EU tax paradises.
Though being hailed as a vital “first step”, the failure of the member states to come to an agreement on any sanctions for those blacklisted provoked the European commissioner for economic and financial affairs, Pierre Moscovici, to openly admit it was as yet “an insufficient response”. There were about 20 countries that are thought to facilitate tax evasion and November’s Paradise Papers leak gave the initiative a new momentum. The papers made public some of the intricate ways the world’s richest individuals and entities evade paying taxes using offshore havens.
The EU had struggled for more than a year to agree on the list due to internal divisions. Smaller, low-tax, EU member states such as Luxembourg, Ireland and Malta were concerned about discouraging multinational corporations with the United Kingdom fighting hard against the blacklist since its own crown independencies such as the Virgin Islands could be potentially jeopardized. On top of agreeing on the final blacklist, there were also considerations being made for the Caribbean countries that had been damaged during hurricanes earlier this year.
European Economic Affairs Commissioner Pierre Moscovici earlier commented that EU leaders were still in talks over an initial list of 29 countries, with disagreements still strong on who will make the final version. “Since Thursday, we have entered a phase of intense political and diplomatic activity,” Mr. Moscovici commented. “And I do see a risk that some countries whose names were quoted in the many tax scandals over the last five years may not be listed. That would be strange,” he warned.
The biggest problem has been the issue of enforcement. EU member states still disagree whether blacklisted countries should be subjected to financial sanctions or whether the blacklist itself is shaming enough. Some states support tough restrictions against the listed tax havens such as exclusion from World Bank or EU funding but the discussions are still ongoing. Other states are unwilling to draw up common measures in belief that responsibility is better left to member states.