UK-linked tax havens likely to be let off the hook in EU’s blacklist review

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An Oxfam stunt calling for action to tackle tax havens. Credit: Tineke D'haese/Oxfam

Nine of the world’s worst tax havens look set to get a clean bill of health in the first annual review of the EU tax haven blacklist, Oxfam warns today, despite these countries continuing to facilitate tax avoidance. Six of the tax havens likely to be removed from the EU’s black and grey lists are British overseas territories or crown dependencies.

Oxfam’s new report, Off the Hook, comes as European Finance Ministers prepare to publish their review at a Brussels meeting next week. Oxfam’s analysis reveals that UK-linked Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, the Isle of Man and Jersey, as well as the Bahamas, Hong Kong and Panama, are likely to be de-listed entirely by the EU, in recognition of tax reforms introduced by these countries since the original list was published.

Oxfam argues that these reforms do not go far enough. For example, a requirement for companies to hold meetings and employ a small number of staff in a jurisdiction may be a small price for a large company to pay in order to continue enjoying zero tax rates and shifting profits.  In addition, weak assessment criteria set by the EU means that countries which allow profit shifting through some harmful tax practices, and low or zero corporate tax rates, are slipping through the net.

The head of Oxfam’s inequality campaign, Rebecca Gowland, said: “Tax avoidance costs poorer countries and regions $170 billion a year, money which could be far better spent funding schools and hospitals for the world’s poorest people. European governments should not whitewash key players in the murky world of global tax avoidance. The UK can lead the way by pushing its territories and dependencies to come clean about what happens on their shores.”

A key opportunity for the UK Government to secure meaningful reform on tax transparency was missed this week, when a debate on a cross-party amendment to the Financial Services Bill, requiring Crown Dependencies to adopt public registers of company ownership, was cancelled by the Government.

Oxfam’s report on the blacklist also highlights that Cyprus, Ireland, Luxembourg, Malta and the Netherlands would appear on the blacklist if EU Member States were not given an automatic exemption.

Multinational companies shifted $600 billion (£455 billion) in profits to tax havens in 2015 with a third of this going into tax havens in the EU. This deprived rich and poor countries alike of the money they need to invest in poverty and inequality busting public services such as healthcare and education.

Political interference in the screening process also means that tax havens such as Switzerland and the United States are unlikely to feature on the blacklist – even though both should on the basis on their tax practices.

Oxfam also found that reforms introduced by some countries to escape the blacklist are ineffective or cause more harm. For example, the EU only considers tax incentives to be harmful if they give foreign companies or profits an unfair advantage over national companies or profits.  As a result, Hong Kong has escaped the blacklist by extending its harmful tax incentives to profits made in Hong Kong as well as overseas.

Gowland said: “The EU should blacklist countries with zero tax rates for companies, to make it clear that shifting profits to these tax havens is unacceptable. A strong deterrent is needed to stop countries competing in a race to the bottom on corporate tax, which deprives other countries of revenue that could help fight poverty.”

ENDS

Notes to Editors

The report ‘Off the Hook’ and methodology document is available on request.

Four UK-linked territories – Bermuda, the Cayman Islands, Jersey and the British Virgin Islands – were named as among the 15 worst corporate tax havens in the world, in Oxfam’s Tax Battles report published December 2016:

https://policy-practice.oxfam.org.uk/publications/tax-battles-the-dangerous-global-race-to-the-bottom-on-corporate-tax-620159

The EU published its tax haven blacklist in December 2017. It currently blacklists five small island states, while another 63 countries that have promised to reform their tax practices ahead of the review are on a ‘grey list’. Countries on the EU’s ‘grey list’ had to commit to reform their national legislation in line with the EU’s requirements by the end of 2018.

Oxfam analysed whether the promises and reforms made by “grey listed” countries meet the EU’s criteria for either being removed or blacklisted. It suggests that the EU will put 18 countries onto the ‘black list’ for failing to reform sufficiently. However the EU’s low bar for screening criteria ignores many harmful tax practices, such as low or zero corporate tax rates, and means that nine tax havens will be dropped from the grey list.

Oxfam analysis indicates that:

  • 23 countries will be removed from the grey list: Aruba, Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Costa Rica, Faroe Islands, Greenland, Guernsey, Hong Kong, Isle of Man, Jamaica, Jersey, Republic of Korea, Labuan Island, Liechtenstein, Macao, North Macedonia, Panama, Qatar, Taiwan, Tunisia, Uruguay
  • 3 new countries will be added to the grey list: Australia, Canada and South Africa
  • 29 countries currently on the grey list will remain there: Albania, Anguilla, Antigua and Barbuda, Armenia, Barbados, Belize, Bosnia and Herzegovina, Botswana, Cabo Verde, Curaçao, Dominica, Fiji, Jordan, Malaysia, Maldives, Mauritius, Mongolia, Montenegro, Montserrat, Morocco, Namibia, Saint Lucia, Saint Vincent and the Grenadines, Serbia, Seychelles, Swaziland, Switzerland, Thailand, and Vietnam
  • 5 countries will remain on the blacklist: America Samoa, Guam, Samoa, US Virgin Islands, and Trinidad and Tobago
  • 18 countries will be moved from the grey list to the black list: Bahrain, Cabo Verde, Cook Islands, Dominica, Fiji, Grenada, Marshall Islands, Morocco, Nauru, New Caledonia, Niue, Oman, Palau, Saint Kitts and Nevis, Turkey, Turks and Caicos Islands, United Arab Emirates, and Vanuatu