Who Will Be On The EU’s Tax Haven Blacklist?

European Union Blacklist of Uncooperative Tax Jurisdictions

29 November 2017

The European Union is about to release a blacklist of uncooperative tax jurisdictions as part of the international effort to crackdown on tax avoidance. The blacklist has sparked speculation over which countries are most under threat.

Soon after the ParadisePapers were released, the EU Economic and Financial Affairs Council (Ecofin) confirmed that it plans to approve an EU list of non-cooperative jurisdictions on December 5 as part of ongoing efforts to prevent tax fraud and promote good governance worldwide.

Documents leaked to the Financial Times have so far revealed that the EU has told 53 countries and territories that they risk being blacklisted. This includes warnings to 41 low tax, high secrecy jurisdictions, which state that if they don’t change their ways they will be blacklisted.

However, some critics are questioning whether this latest effort will have more credibility than previously published lists that excluded EU member states.

"Given the staggering number of tax scandals in recent years, it is important that the EU sets out a strong and credible tax havens black list. The finance ministers of the member states must not let political considerations cloud their judgement when agreeing their final list next week," said Sven Giegold, the Greens/EFA Group spokesman for economic and financial affairs in the European Parliament. "It is correct that the EU will name and shame tax havens, but it needs to put its own house is order too. At least the screening process should be applied on all countries equally. EU tax havens should not be let off the hook."

The European Council began analysing non-EU countries last year to determine whether or not to classify them as tax havens. After an initial screening, the council sent inquiry letters to 92 non-EU jurisdictions in February 2017. In the months since, 22 jurisdictions have been found compliant with the EU’s demands and eight others have said they will change their tax rules. One was still being assessed in early November and eight others had not responded by this time. This could mean that at least 53 jurisdictions remain outside the EU criteria and risk being listed.

Politically influenced criteria?

The EU has a three-pronged criteria for judging countries and territories:

  • The level of transparency by OECD standards;
  • The fairness of the tax system itself; and
  • Measures against base erosion and profit shifting.

Depending on which states are included, the EU’s blacklist has the potential to have a massive impact on the tax market, but some anti-tax avoidance campaigners have their reservations.

"The approach is positive in that the criteria are largely transparent and objectively verifiable; but weak in that they’ve defined the criteria in such a way as to ensure the US is left out, as well as EU members," Alex Cobham, chief executive of the Tax Justice Network, told International Tax Review. "Independent researchers can’t be certain whether the list published on December 5 will have 41 jurisdictions or zero."

"The EU blacklist can send a number of messages to 'tax havens’," Cobham said. "The exclusion of the US and EU member states sends one message: that the EU is not yet interested in establishing a level playing field for financial centres of all sizes, including rich countries."

Applying the EU’s criteria, the Tax Justice Network estimates that out of the 61 jurisdictions that would fail to meet it 41 jurisdictions should be listed, including a number of UK overseas territories and crown dependencies – such as the Cayman Islands, Bermuda and Gibraltar. The campaign group also believes Cyprus, Ireland, Luxembourg, Malta, and the Netherlands should be included.

Oxfam’s latest report, 'Blacklist or Whitewash?', also applied the EU’s criteria to the 92 countries screened by the EU, as well as to the 28 EU member states, and found that at least 35 countries, including Switzerland and Bermuda, and Ireland, Luxembourg, the Netherlands and Malta should be included.

According to the Bureau of EconomicAnalysis, more than half of US foreign direct investment (FDI) is held in seven low-tax countries and regions: Bermuda, the UK’s Caribbean islands, Ireland, Luxembourg, the Netherlands, Switzerland and Singapore.

The TJN further speculates that the UK could even find itself on the blacklist once the Brexit process is complete. Whether or not this should be the case is still very much disputed.

Caroline Garnham, CEO of Garnham Family Office Services, told International Tax Review that entrepreneurs are entitled to keep their money in whichever country they chose, if not then the government should put exchange controls back in place. "Sovereignty goes as far as our shores, but it doesn’t go beyond them. We have very little control over our overseas territories and crown dependencies," Garnham said. "If we don’t like it, we can blacklist them but we cannot tax income and gains made to their residents unless in some way we can input that income or gains into residents of their own country."

"How can you abolish a tax haven? It can be blacklisted and put out of business, but just because a little country wants to attract investment to its shores, what’s wrong with that?" she added.

Nevertheless, the upcoming blacklist is likely to exclude member states and it is expected that Switzerland and the US will not appear.


The EU’s blacklist is being published in the middle of a debate over tax avoidance and how best to confront the problem and tackle it. There are vast amounts of money at stake. An estimated $10 trillion is reportedly held in schemes based in the Netherlands and Luxembourg alone. This figure is more than half the size of the US economy.

Almost at the same time as the blacklist being approved, the European Parliament has a plenary session coming up in December on the recommendations of the Panama Papers (PANA) committee. This includes the possibility of new sanctions on tax professionals and the companies involved in tax avoidance. While the blacklist addresses non-EU jurisdictions, the European Parliament may be about to impose tough measures within the EU.

"There must be consequences and, in some instances, they should lose their licenses for their actions," Jeppe Kofod, vice president of the S&D; group and co-rapporteur of the PANA committee, told International Tax Review. "We need strong deterrents against engaging in these dubious schemes."

Others have expressed the view that it is difficult to crackdown on tax havens, even if you target the advisers for sanction themselves – let alone the jurisdictions in question. There is no quick fix to make these problems go away, in other words.

"The tax avoidance landscape is vast and complex, and there is no way to 'nuke it from orbit’ as it were," tax barrister David Quentin said. "These rules may, however, have the consequence that certain kinds of actor are more exposed in respect of certain kinds of tax avoidance."

Given that the sums are not peanuts by any standard, the kind of message the EU sends on tax havens is of vital importance. A tough stance would have worldwide implications, but so would a soft approach.

The above article was published on www.internationaltaxreview.com on November 29 2017 and has been republished with the approval of the Publisher.