In February, EU member states sent letters to more than 92 countries notifying them that they now will be screened to determine if they should be included on a new blacklist of tax havens. That’s not to say that all 92 countries that have received the letter will ultimately end up on the blacklist. Rather, the selection of jurisdictions was based on a set of objective criteria, including their financial activity, political stability, and the extent of their financial and political ties to the EU.
So, who exactly is on the list? While the names of the specific countries the EU contacted have yet to be released to the public, the list reportedly is based on research that the European Commission carried out in September of last year. Experts have speculated that countries like Israel, Canada, and the U.S. are probably among those that have received letters, as well as developing countries that act as important financial centers, such as Mauritius. It also seems likely that a number of UK territories that function as offshore hubs, such as the Isle of Man and Jersey, are included.
Now that the EU has complied the list, the next step is for members to assess the 92 countries. Not all of the countries will be blacklisted. It’s been reported that the EU will first aim to participate in some sort of dialogue with each of the countries in order to figure out which ones should end up on the final list. Just because a jurisdiction doesn’t have a corporate tax rate doesn’t mean that it is automatically an offshore tax haven. The reality is more complex.
“Member states generally agree that the absence of a corporate tax system, zero or almost zero rate of taxation does not automatically mean that a jurisdiction encourages offshore activities,” an internal EU working document on the issue reads. “However, there is evidence that jurisdictions that facilitate offshore structures or arrangements typically have no or very low corporate income tax and that they capture large amounts of financial flows.”
Moreover, it seems there are things the 92 countries will be able to do to avoid being blacklisted. To avoid being put on the list, a country would likely need to commit to complying with all international standards around financial transparency, pledge to avoid any kind of preferential tax measures, commit to certain rules and regulations around offshore structures, and implement the OECD’s global plan again tax avoidance.