European finance ministers look set to give nine of the world’s worst tax havens a clean bill of health when they publish their first annual review of the EU tax haven blacklist at a meeting in Brussels this week, says Oxfam.
New analysis by Oxfam reveals that the Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Hong Kong, the Isle of Man, Jersey and Panama are likely to be de-listed entirely by the EU. Some of them were at the centre of recent tax scandals highlighted by the Paradise Papers and Panama Papers.
Oxfam’s report, Off the Hook, 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 USD 600 billion (EUR 526 billion) in profits to tax havens in 2015 with a third of this going into tax havens in the EU. This deprives rich and poor countries alike of the money they need to invest in poverty- and inequality-busting public services such as healthcare and education. Women and girls are hit hardest, as these services are critical for them.
Oxfam tax advisor and author of the report, Johan Langerock said: “The EU was bold to establish a tax haven blacklist to help stop tax dodging. But since then, it seems to have lost its nerve. European governments appear set to whitewash some of the world’s worst tax havens. Recent discussions around the money laundering blacklist show how power politics and economic pressure can derail a strong, principled approach. The EU must beef up its blacklist or this whole process could be a farce.”
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’.
Oxfam analysed whether the promises and reforms made by ‘grey-listed’ countries meet the EU’s criteria for either being removed or blacklisted. This analysis suggests that the EU will add 18 countries onto the blacklist for failing to reform sufficiently.
However, the EU’s weak assessment criteria ignore many harmful tax practices, such as low or zero corporate tax rates, which means that actual nine tax havens will be dropped from the ‘grey list’. 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.
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.
Corporate tax dodging costs France, Spain, Italy and Germany an estimated €35 billion in 2015 alone. If this money was invested in public healthcare it could cut the amount citizens pay for medical care by up to 28 per cent.
Oxfam is calling on EU governments to strengthen the blacklist criteria, ensure the screening process is free from political interference, and monitor tax reforms being implemented by ‘grey list’ countries to ensure they are effective. European governments must also hold themselves to the same standards by which they are judging others.
“Harmful tax competition is increasing in Europe, but governments refuse to act effectively against tax havens within the EU’s borders. Years of austerity in Europe have widened the gap between rich and poor, contributing to increasingly polarised societies and plunging the EU and its member states into crisis. It is time for EU governments to put their own house in order”, added Langerock.
* Read Off The Hook here
* Oxfam International https://www.oxfam.org/en
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