Members of the European Parliament (MEPs) adopted a resolution last week that seeks to put more pressure on its global financial watchdog, the European Commission, that would keep so-called “tax haven” jurisdictions blacklisted until the material changes the European Union (EU) wants to see made to those jurisdictions’ tax systems are legislated.
A press statement on the European Parliament’s website lays out the discussions had by the MEPs, who contend that the current systems that are used to decide whether or not to blacklist countries and remove them from the blacklist are “confusing and ineffective”.
And the MEPs are calling for the new process of establishing blacklists to be formalized in a legally binding instrument by the end of this year.
In the statement, Chair of the Subcommittee on Tax Matters Paul Tang mentioned The Bahamas, Guernsey and the Cayman Islands as countries that should have never been delisted by the EU.
The majority of MEPs who voted on Thursday last week agreed that the EU’s list of tax havens, which was set up in 2017, has not “lived up to its full potential”.
The European Parliament believes jurisdictions like The Bahamas and the Cayman Islands should not be allowed to make simple tweaks to their tax systems in order to be removed from the blacklist, calling for jurisdictions to make more stringent changes.
The lawmakers lamented that the current list of tax havens covers fewer than two percent of those causing worldwide tax revenue losses.
“MEPs propose changes that would make the process of listing or delisting a country more transparent, consistent and impartial,” the statement noted.
“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,” it stated.
Guardian Business understands that the resolution has to go through more tiers of the EU before it is brought to force and local lawmakers are watching its development carefully.
Attorney General Carl Bethel did not yet want to speak directly to the European Parliament’s resolution.
“While the list can be a good tool, member states forgot something when composing it, actual tax havens,” said Tang.
“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.
“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 percent of tax havens.”
He suggested that the EU body scrutinize their own member states for those that display characteristics of a tax haven and penalize them as well.
Tang criticized the Cayman Islands’ removal from the EU blacklist while it continues to run a zero percent tax rate policy.
“Among other measures proposed, the resolution therefore says that all jurisdictions with a zero percent corporate tax rate or with no taxes on companies’ profits should be automatically placed on the blacklist,” the statement noted.
Being removed from the blacklist should not be the result of only token tweaks to that jurisdiction’s tax system, MEPs 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.