EU tax haven blacklist continues crackdown

The EU has finalised its tax-haven blacklist of tax havens, following months of screening of global tax policies by the European Council’s Code of Conduct Group.

The list of 17 jurisdictions is the EU’s latest initiative to crack down on aggressive tax avoidance, made more crucial by the recent Panama and Paradise paper information leak.

The following jurisdictions are on the list: American Samoa, Bahrain, Barbados, Grenada, Guam, Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, South Korea, Trinidad and Tobago, Tunisia and United Arab Emirates.

A “grey list” details a further 47 jurisdictions, including the major offshore finance centres of Bermuda, Cayman Islands, Guernsey, Isle of Man and Jersey – the first two of which are British Overseas Territories, and the latter three are UK Crown dependencies.

The EU has extracted promises from all five to introduce new rules, relating to the EU’s concern that such jurisdictions “facilitate offshore structures which attract profits without real economic activity.”

Pierre Moscovici, European tax commissioner, has called on member states to set a timetable to examine the grey-listed countries’ commitments in the next six months.

“The EU tax evasion blacklist is a public shot across the bows at jurisdictions that the EU considers tax havens,” said Jo Torode, a financial crime lawyer at Ropes & Gray.

The European Commission produced a scoreboard to determine which jurisdictions made the list, using economic, financial, stability and tax governance indicators.

Risk indicators included transparency and exchange of information, preferential tax regimes and no corporate income tax or a zero rate of corporate tax.

“It is too early to tell how effective the regime will be, and a lot will depend on what, if any, enforcement measures are put in place at both the EU and national level,” she continued.

Torode added: “For now, businesses will have to keep an eye on further developments, including, firstly, whether countries on the “grey” list (which include Bermuda and Jersey) now take steps to avoid being blacklisted, and, secondly, what the EU will do about its own members that would, if the regime were broader, find themselves on either list.