EU tax haven blacklist is not catching the worst offenders, according to MEPs

MEPs adopted a resolution pushing for the system used to draw up the EU list of tax havens to be changed, as it is currently “confusing and ineffective”.

The EU’s list of tax havens, set up in 2017, has had a “positive impact” so far but has failed to “live up to its full potential, [with] jurisdictions currently on the list covering less than 2% of worldwide tax revenue losses”, MEPs said.

The resolution, adopted in plenary on Thursday 21 January, by 587 votes in favour, 50 against and 46 abstentions, calls the current system “confusing and ineffective”. It rounds up the debate held on Wednesday evening with the Council Presidency and the Commission.

MEPs propose changes that would make the process of listing or delisting a country more transparent, consistent and impartial.

Criteria should be added to ensure that more countries are considered a tax haven and to prevent countries from being removed from the blacklist too hastily, they say.

EU member states should also be screened to see if they display any characteristics of a tax haven, and those falling foul should be regarded as tax havens too.

Include more practices

Parliament says that the criterion for judging if a country’s tax system is fair or not needs to be widened to include more practices and not only preferential tax rates.

The fact that the Cayman Islands has just been removed from the black list, while running a 0% tax rate policy, is proof enough of this, MEPs say.

Among other measures proposed, the resolution therefore says that all jurisdictions with a 0% corporate tax rate or with no taxes on companies’ profits should be automatically placed on the blacklist.

More stringent criteria

Being removed from the blacklist should not be the result of only token tweaks to that jurisdiction’s tax system, MEPs say, arguing that for example the Cayman Islands and Bermuda were delisted after “very minimal” changes and “weak enforcement measures”.

The resolution therefore calls for screening criteria to be more stringent.

Fairness and transparency

All third countries need to be treated and screened fairly using the same criteria, MEPs say, stressing that the current list indicates that this is not the case.

The lack of transparency with which it is drawn up and updated adds to these misgivings.

They call for the process of establishing the list to be formalised through a legally binding instrument by the end of 2021 and question whether an informal body such as the Code of Conduct Group is able or suitable to update the blacklist.