EU shamed by MEPs as bloc’s ‘ineffective’ tax-haven blacklist only catches 2% of offenders

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The European Union’s tax haven blacklist system has failed to catch the worst offenders, MEPs have said last week as they voted in favour of a resolution that calls on the bloc to act. They said the list, which was set up in 2017, failed to “live up to its full potential, [with] jurisdictions currently on the list covering less than 2 percent of worldwide tax revenue losses”.

The resolution, adopted in plenary on Thursday by 587 votes in favour, 50 against and 46 abstentions, called the current system “confusing and ineffective”.

It rounded up the debate held on Wednesday evening with the Council Presidency and the Commission.

The European Parliament politicians said a tightening of the rules was needed adding that the Cayman Islands, Bahamas and Guernsey should not have been taken off the blacklist.

The EU Parliament said 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, citing as an example the fact that the Cayman Islands has just been removed from the blacklist, while running a 0 percent tax rate policy.

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Among other measures, they proposed that countries with a 0 percent corporate tax rate or with no taxes on companies’ profits should be automatically added to the list.

In a press release published after the vote, the Parliament’s spokesperson wrote: “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 (PARA 9).”

After the vote, the Chair of the Subcommittee on Tax Matters, Paul Tang (S&D, NL) said: “By calling the EU list of tax havens ‘confusing and inefficient’, the Parliament tells it like it is.

“While the list can be a good tool, member states forgot something when composing it: actual tax-havens.

“The truth is, the list is not getting better, it’s getting worse. Guernsey, the Bahamas and now the Cayman Islands are only some of the well-known tax havens that member states have taken off the list.

“In refusing to properly address tax avoidance, national governments are failing their citizens to the tune of over €140billion. Especially in the current context, this is unacceptable.

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“That is why the parliament strongly condemns the recent delisting of the Cayman Islands and calls for more transparency and stricter listing criteria.

“However, if we focus on others, we also need to look ourselves in the mirror. The picture is not pretty.

“EU countries are responsible for 36 percent of tax havens.”

Parliament said 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.

British overseas territories had been offered some protection whilst it was a member of the EU however with its departure from the bloc, this is no longer the case and will be subject to full EU scrutiny.

The text of the vote made clear Brexit was based on “mutual values and geared towards common prosperity, which automatically excludes aggressive tax competition”.

Robert Palmer, the director of the Tax Justice UK campaign group, said: “Post-Brexit the UK tax havens have lost their protector within the corridors of Brussels.

“I’d expect to see the EU to ramp up pressure on places like Jersey to clean up their act.

“The UK itself has been warned that if the government tries a Singapore-on-Thames approach, with a bonfire of regulations and taxes, then the EU will act swiftly.”

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