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AfricaMoney | August 20, 2017

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The Expert Explains: What next on the EU ‘tax havens’ agenda?

The Expert Explains: What next on the EU ‘tax havens’ agenda?

 Back in June, the European Commission published an EU blacklist of ‘tax havens’ around the world, which included Mauritius, Seychelles and the Maldives. However, this does not mark the end of the story, and the EU corporate tax agenda still continues apace. What are the Parliamentary Committee’s recommendations in relation to tax havens? For those who wish to dig deeper, here’s the explanation, straight from the desk of our expert guest contributor, Samantha Seewoosurrun, a reputed professional consultant in the financial services sector.

The fight against alleged ‘tax havens’ is firmly back on the EU agenda, with Mauritius, Seychelles and the Maldives currently included on the EU’s tax ‘blacklist’, which was announced back in June.  Members of the European Parliament’s Economic and Monetary Affairs Committee have recently drawn up a set of new recommendations to the European Commission on tax transparency, which have been drafted by a UK Labour MEP, Anneliese Dodds, and a Czech Conservative MEP, Luděk Niedermayer.

What are the Parliamentary Committee’s recommendations in relation to tax havens? The European Parliament will call on the European Commission to bring forward a proposal to establish, in cooperation with the OECD and the UN among others, cogent criteria to define ‘tax havens’. The criteria should be based on comprehensive, transparent, robust, objectively verifiable and commonly accepted indicators.

Beyond this, the criteria should cover a long list of ‘concepts’ such as banking secrecy, recording of ownership of companies, trusts and foundations, the publication of company accounts, capacity for information exchange, efficiency of tax administration, promotion of tax evasion, existence of harmful legal vehicles, prevention of money laundering, automaticity of information exchange, existence of bilateral treaties, and international transparency commitments and judicial cooperation.

The European Parliament will then recommend, based on those criteria, that “the Commission should put forward a revised list of tax havens, which would replace its interim list as put forward in June 2015” and that “the Commission should review the list on at least a biannual basis, or upon the justified request of a jurisdiction on the list”.

There are a number of interesting elements here that need to be unpacked, and which provide at least a ray of hope for those countries seeking to get off the list.  First of all, when the list was announced in June 2015 – rather boldly in a press conference with the responsible EU Commissioner Pierre Moscovici standing in front of a powerpoint slide showing Mauritius – there was no sense that it was ‘interim’.

The European Commission was fully signed up to the list, or at least it was until the OECD allegedly sent a strongly worded letter demanding an explanation as to why so many of the countries on its own ‘White List’ were now being blacklisted by the EU. The re-writing of history to describe the list as ‘interim’ now shows just how much trouble it has caused, with the European Commission now taking the position that it has simply ‘collected and presented’ data on national blacklists which the 28 EU Member States are responsible for.

Secondly, the European Parliament is offering the European Commission a ‘get out of jail free card’ by saying that the list should be reviewed bi-annually or upon the justified request of a jurisdiction on the list.

Mauritius would be fully justified in requesting its removal from the list, since both Italy and Estonia have removed the country from their national blacklists, and so now only 8 out of 28 EU Member States have Mauritius on their national blacklists. Given that the EU tax ‘blacklist’ is only supposed to contain those countries listed by 10 or more EU Member States (even if this was entirely arbitrary in any event) then Mauritius really should be removed.

Moving on to the companies which make use of alleged ‘tax havens’, what does the EU have in store for them? The European Parliament will be asking the European Commission to present a proposal for a ‘catalogue of counter-measures’.

The EU and Member States would apply, in their capacity as shareholders and financers of public bodies, banks and funding programmes, to companies which “use tax havens in order to put in place aggressive tax planning schemes and therefore do not comply with Union tax good governance standards”. The companies would be banned from access state aid or public procurement opportunities, and from accessing certain EU funds.

EU sanctions could also be applied to the countries labelled as ‘tax havens’, with the European Parliament suggesting a prohibition on the conclusion of trade agreements with these countries, and asking the European Commission to check whether existing trade agreements with countries identified as tax havens can be suspended or terminated.

So what are the next steps? The European Parliament is due to vote on the recommendations on 16 December, and the European Commission will be obliged to respond within three months, either with a legislative proposal or with an explanation for not doing so.

While European Commission officials having been lying low on the issue of tax havens for the past few months, in the light of the tactical and diplomatic mistakes made over the launch of the list in June, the European Parliament’s report will allow them to get back on the ‘front foot’. Mauritius, Seychelles and Maldives should all reinforce their diplomatic efforts to get off the list before more draconian measures are introduced.


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