EU warns 53 ju­ris­dic­tions of tax black­list threat

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY FT COR­RE­SPON­DENT

Euro­pean of­fi­cials have told 53 coun­tries and ter­ri­to­ries that they risk be­ing black­listed as tax havens af­ter the UK ear­lier de­layed warn­ings to a dozen ju­ris­dic­tions with ties to Bri­tain.

Euro­pean of­fi­cials have told 53 coun­tries and ter­ri­to­ries that they risk be­ing black­listed as tax havens af­ter the UK ear­lier de­layed warn­ings to a dozen ju­ris­dic­tions with ties to Bri­tain.

In Oc­to­ber Brus­sels ad­vised 41 coun­tries that they would be black­listed un­less they promised to change their tax rules, ac­cord­ing to peo­ple close to the talks. But Bri­tish con­cerns caused the EU to hold back sim­i­lar warn­ings for 12 more ju­ris­dic­tions in­clud­ing Ber­muda, the Isle of Man and Cay­man Is­lands — what one of­fi­cial called the “usual sus­pects”. Lon­don changed its stance late last week, two days be­fore the Par­adise Papers leak put the is­sue of global tax leg­is­la­tion back in the spot­light.

The Euro­pean Coun­cil, made up of EU mem­ber states, started analysing non-EU coun­tries last year to de­cide if they should be des­ig­nated as tax havens, send­ing in­quiry let­ters to 92 ju­ris­dic­tions in Fe­bru­ary af­ter ini­tial screen­ing.

The coun­cil has set cri­te­ria for coun­tries to avoid be­ing la­belled as tax havens. Its def­i­ni­tion of fair tax rules says ju­ris­dic­tions should not offer pref­er­en­tial tax mea­sures or ar­range­ments that en­able com­pa­nies to move prof­its to avoid tax. Coun­tries should also meet trans­parency stan­dards and im­ple­ment anti profit-shift­ing guide­lines set by the OECD.

Coun­tries that fail to meet the coun­cil’s cri­te­ria can avoid be­ing black­listed if they pro­vide a po­lit­i­cal com­mit­ment and a spe­cific plan to com­ply. Rep­re­sen­ta­tives from all 28 EU mem­ber states will need to ap­prove the fi­nal list, which is ex­pected to be pub­lished on 5 De­cem­ber.

Mem­ber state rep­re­sen­ta­tives are still de­bat­ing the im­pli­ca­tions of be­ing on the EU’s list, which will be up­dated an­nu­ally.

A Bri­tish gov­ern­ment spokesman said: “The UK has led in­ter­na­tional ef­forts to pre­vent peo­ple from hid­ing their money abroad. We sup­port the de­vel­op­ment of a com­mon EU list of non-co-op­er­a­tive ju­ris­dic­tions, and we are work­ing con­struc­tively with our Euro­pean part­ners to­wards fi­nal­is­ing one by the end of 2017.”

Molly Scott Cato, a Green MEP and a mem­ber of the Euro­pean Par­lia­ment’s Panama Papers com­mit­tee, said: “Once again, the UK and its off­shore ter­ri­to­ries are at the heart of things.” She said Bri­tain had to “clean up its act” and regulate the “le­gal limbo” of its over­seas ter­ri­to­ries if it wanted a pos­i­tive trad­ing re­la­tion­ship with the EU af­ter Brexit.

The steps taken by the Euro­pean Coun­cil come af­ter crit­i­cism of a pre­vi­ous Euro­pean Com­mis­sion at­tempt to cre­ate a tax-haven black­list for the EU. Pub­lished in June 2015, the com­mis­sion’s list in­cluded 30 coun­tries, com­posed of those that ap­peared on at least 10 mem­ber states’ in­di­vid­ual black­lists. The list pro­voked a back­lash for be­ing un­fair and ar­bi­trary.

The cur­rent at­tempt by the coun­cil has also been crit­i­cised. Elena Gaita of Trans­parency In­ter­na­tional, a lobby group, said the coun­cil’s code of con­duct group on busi­ness tax­a­tion, which is run­ning the process, “is the most se­cre­tive coun­cil group — the coun­cil’s black box”.

She said black­list­ing coun­tries was “a po­lit­i­cal process” and that se­crecy risked cre­at­ing a list that was “far from ob­jec­tive and com­pre­hen­sive”.

Of the 92 ju­ris­dic­tions that were sent let­ters in Fe­bru­ary, 22 proved they were com­pli­ant with the EU de­mands. Eight said they would change their laws to com­ply, one is still be­ing as­sessed and eight did not re­spond. The rest failed to meet at least one cri­te­ria, ac­cord­ing to peo­ple close to the process.

Cay­man Is­lands is ranked 42nd ac­cord­ing to the Global Fi­nan­cial Cen­tres In­dex, a global rank­ing on the com­pet­i­tive­ness of Off­shore Fi­nan­cial Cen­tres. Lon­don, New York, Sin­ga­pore, Hong Kong and Tokyo are the top five ranked.

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