Survival of the Richest

Europe's role in upholding an unjust tax system
Blacklisting ‘non-cooperative jurisdictions’
The EU is currently working towards establishing a common
blacklist of so-called ‘non-cooperative jurisdictions’, or, in
other words, tax havens. The Commission revealed plans
for a common list in its external strategy on tax, published
in January 2016, 124 and the idea has been supported by the
Member States. 125 The European Parliament has also called
for a common EU list of tax havens, but has emphasised
that the list needs to be ‘regularly updated and based on
comprehensive, transparent, robust, objectively verifiable
and commonly accepted indicators’. 126 Unfortunately, this
does not seem to be the case with the EU blacklist. First of
all, the European Commission has made it clear that no EU
Member State can be included on the EU blacklist, and thus
all countries will not be treated equally. 127 This is in spite of
the fact that several EU Member States are using a number
of tax practices that can facilitate corporate tax dodging
(see Table 1 and Figure 2). Second, the internal negotiations
about the blacklist are currently taking place in the so-called
Code of Conduct Group on business taxation 128 – a discussion
forum that has become controversial due to its high level of
secrecy and opacity, as well as the very political nature of the
discussions. 129 In other words, the process is not transparent.
Third, the EU Member States have now agreed a first
set of criteria for what constitutes a ‘non-cooperative
jurisdiction’. 130 These criteria are very top level and leave a
lot of room for discretion and political bias.
Lastly, in addition to excluding EU countries, there is a risk
that an EU blacklist would not include traditional allies, such
as Switzerland and the United States. 131 This is in spite of the
fact that the Financial Secrecy Index, published by the Tax
Justice Network, ranked Switzerland as top of the list of the
most important providers of international financial secrecy in
2015. 132 The United States, which ranked third on Tax Justice
Network’s list, is also increasingly being pointed to as one of
the biggest, and growing, tax havens in the world. 133
Another concern with the first criteria adopted by EU
Member States is that there is a strong focus on demanding
that countries sign up to the OECD decisions on BEPS and
exchange of information. 134 As explained earlier in this report
(under ‘Concerns about BEPS’) and later (under ‘Bank secrecy
and the not very automatic information exchange’), the OECD
standards do not necessarily guarantee that countries will
not be tax havens. Meanwhile, developing countries may
find themselves faced with the choice of being blacklisted
by the EU (and risk being sanctioned) or having to sign up to
a set of agreements that have been agreed behind closed
doors by the OECD and G20 members, while more than 100
developing countries were excluded from the negotiations
(see above under ‘Exclusive global decision-making’). This
means developing countries could be pressured to agree to
standards that have not been designed in their interest.
A fair list of tax havens would need to be negotiated at the
global level, with all countries participating on an equal
footing in both the standard setting and the blacklisting, and
no countries should be exempt from blacklisting. However,
the essence of the tax haven problem is that financial assets
can be moved from one end of the world to the other with
the click of a mouse. Therefore, a blacklist that includes a
few smaller tax havens, but excludes some of the world’s
biggest, would not solve the problem but would simply move
the problem from one country to the other.
Another concern is that the Commission has linked the tax
havens blacklist to its proposal on public country by country
reporting, which strongly undermines the proposal, as
discussed in more detail later in this report.
26 • Survival of the Richest