On 21 January 2021, the European Parliament passed a resolution pushing for the system used to draw up the EU list of tax havens to be reformed. It was adopted in plenary by 587 votes in favour, 50 against and 46 abstentions.

The resolution proposes changes that would make the process of listing or delisting a country more transparent, consistent and impartial. Particularly, 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. 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.

While saying the EU’s list of tax havens, set up in 2017, has had a ‘positive impact’ so far, the European Parliament said the measure has failed to ‘live up to its full potential, [with] jurisdictions currently on the list covering less than 2% of worldwide tax revenue losses’. Parliamentarians also said the list was ‘confusing and inefficient’.

After the vote, the Chair of the Subcommittee on Tax Matters, Paul Tang (S&D, NL) said:

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 €140 billion. Especially in the current context, this is unacceptable.

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% of tax havens.

Widen the scope

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

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.

Tougher requirements

Being removed from the blacklist should not be the result of only token tweaks to that jurisdiction’s tax system, the European Parliament said, 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 countries need to be treated and screened fairly using the same criteria, the European Parliament said, 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.

The European Parliament called 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.

Comments are closed.