By Arielle Salvary
According to the website of the European Council, “the EU list of non-cooperative jurisdictions for tax purposes is part of the EU’s work to fight tax evasion and avoidance.” The list is composed of countries that have either failed to fulfill their commitment to comply with good tax governance criteria within a specific time frame or countries that have refused to comply entirely.
This list is part of the EU’s work to promote and strengthen good tax governance mechanisms, fair taxation and global tax transparency in order to tackle tax fraud, evasion and avoidance.
The creation of this list as stated on the EU’s website is, “not to name and shame countries, but to encourage positive change in their tax legislation and practices through corporations”. It is also noted that once a jurisdiction meets all its commitments, its name is removed from the annex.
To be considered cooperative for tax purposes, jurisdictions are screened on a number of criteria which fall under the broad headings of:
- Tax transparency
- Fair taxation
- Anti-Base Erosion and Profit Shifting (BEPS) measures
The following is the list of countries adopted by the Council on 14 February 2023:
- American Samoa
- British Virgin Islands
- Costa Rica
- Marshall Islands
- Trinidad and Tobago
- Turks and Caicos Islands
- US Virgin Islands
There have been several criticisms leveled against the existence of this list which include the following:
“Tax havens helped billionaires to double their wealth in the last decade and contribute to corporations raking in enormous windfall profits. With this joke list, the EU continues to allow the super-rich and profitable to stash away their fortunes while ordinary people are battling with the cost of living crisis,” these were comments made by Chiara Putaturo Oxfam EU’s tax expert following the release of the updated list in February 2023.
Putaturo also noted that the EU tax havens list continues to be a total whitewash and, “not only has it delisted countries with zero corporate tax rates like Bermuda and the Cayman Islands but it also ignores EU tax havens like Luxembourg.”
Trinidad and Tobago economist Marla Dukharan has classified the EU Blacklist as institutional racism and bullying and describes the penalties being imposed as having “the potential to damage Blacklisted economies irreparably” and “nothing short of economic warfare”.
Presently, this list stands in contradiction to the Financial Action Task Force (FATF) which is the global standard-setting body for anti-money laundering (AML), for combating the financing of terrorism (CFT), and against the proliferation of the trade in weapons of mass destruction. The FATF carries out mutual evaluations which are in-depth country reports analysing the implementation and effectiveness of measures to combat money laundering, terrorist and proliferation financing. The reports are peer reviewed, where members from different countries assess another country.
Notably, the US Treasury Department has previously questioned the substance of the EU’s list and its flawed methodology and has stated US financial institutions would not take the list into account in their AML/CFT policies.
The lack of European nations on this list as mentioned by Putaturo is quite timely since the Russian invasion of Ukraine has revealed that several European nations have been holding the ‘dirty money’ of Russian oligarchs. The Financial Times in April 2022 published a film on Youtube entitled “How London became the dirty money capital of the world” which shows that for two decades Russian oligarchs and companies have been encouraged by British politicians on all sides to invest in London, with critics saying that the ‘London laundromat’ cleans dirty money from Russia and across the globe.
However, the UK along with other European nations such as Denmark and Switzerland and Germany who have also been exposed in banking scandals in recent years have not ever been included on the blacklist. This is despite in March 2019, the European Parliament voted by 505 in favour to 63 against, accepting a new report that likened Luxembourg, Malta, Ireland and the Netherlands, and Cyprus to “displaying traits of tax haven and facilitating beneficial planning.” However, despite this vote, the EU Commission was not obliged to include these EU jurisdictions on the blacklist.
Money being laundered through European cities far outweighs that of those in small island states (SIDS) such as Trinidad and Tobago. It is far easier to move money through financial institutions in Europe than that of SIDS. For instance, in T&T the process to open a bank account is cumbersome whereas in European cities it is very simple and can be done without sometimes even having to do it in person.
Furthermore, all of this brings into question the validity of this EU list since it differs from international standards. It also highlights that there is a lack of accountability and transparency in the methodology employed to create this blacklist.