EU expands tax havens blacklist to Cayman Islands and Panama

Waterfront shopping area in George Town, Grand Cayman. [Jo Ann Snover/Shutterstock]

EU finance ministers added on Tuesday (18 February) the Cayman Islands and Panama, together with Palau and Seychelles, to the bloc’s blacklist of tax havens, which now includes twelve countries.

The four territories have joined the club of ‘non-cooperative jurisdictions for tax purpose as a consequence of “not living up to their commitments,” said European Commission Vice President for Economy Valdis Dombrovskis following the meeting.

The list also includes Fiji, Oman, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu, as well as US territories American Samoa, Guam and the US Virgin Islands.

The ministers’ decision to include the Cayman Islands was the result of the country not applying appropriate measures in the area of collective investment vehicles.

In the case of Palau and Panama, on the radar for a long time, member states pointed to the lack of tax transparency on financial information. When it comes to Seychelles, the EU27 argued the archipelago has “harmful preferential tax regimes.”

Turkey was left off the hook as member states expect the country to “make tangible progress in the effective implementation of the automatic exchange of information” with the EU before the end of the year, the document approved by ministers read.

EU tax haven blacklist triples to include 15 countries

EU finance ministers approved on Tuesday (12 March) the addition of 10 more countries to the EU’s blacklist of tax havens, which currently includes only five jurisdictions and aims to help prevent tax fraud or evasion.

Controversial list 

The EU’s blacklist was set up back in 2017. Within this framework, the EU examines the tax systems of 95 countries around the world to fight tax abuse. The document is periodically revised by the ministers, amid criticism over its scope, as it covers third countries only, and effectiveness in fighting tax abuse.

Dombrovskis argued that all 27 EU countries comply with the criteria of the screening process and are bound by EU legislation “to go even further as regards tax governance than the international standards require.”

In essence, he added, “we are not asking foreign countries to do any more than the EU member states have done themselves in respecting international good tax governance standards.”

The EU maintains that through cooperation and dialogue many jurisdictions have done their homework in implementing tax reforms, although the number of countries included in the list has increased over time.

“The list has proven its worth in improving good tax governance and transparency globally,” said Croatian Finance Minister Zdravko Marić.

According to Dombrovski, 120 tax heaven regimes have been eliminated thanks to the system. “We need to keep investing in this process and consider how we can make it even more effective,” he added.

One the consequences for those countries, Dombrovskis explained, is the matter of reputation, as “being blacklisted by the EU clearly is a signal about the progress in tax governance in those jurisdictions.”

Furthermore, the EU list is linked to rules governing the bloc’s funding preventing money from financing instruments to be channelled through entities in listed countries. Direct investment in these territories is allowed, though.

Mixed feelings

The decision to include well-known tax havens such as Cayman or Panama was welcomed by MEPs and the civil society but they cautioned that it was not enough.

“The blacklist is a step forward in the fight against tax evasion. It is logical that the ministers… are listing well-known tax havens for the first time,” Green MEP Sven Giegold said in a statement.

“But the list has gaps: European governments lack the guts to put the USA and Turkey on the list,” Giegold added.

Chiara Putaturo, an EU policy adviser on tax and inequalities at NGO Oxfam, said she was glad the bloc extended the blacklist to the Cayman Islands or Panama but regretted that Bahamas, Bermuda and the British Virgin Islands, “some of the world’s most harmful tax havens,” were left out.

“The EU needs to strengthen its blacklisting criteria, put its own house in order and push for an ambitious and effective minimum tax rate at the global level,” Putaturo argued.

[Edited by Zoran Radosavljevic]

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