The Big Debate: How Credible are Tax Haven Blacklists?

By Valère Moutarlier, Director, Directorate-General for Taxation and Customs Union, European Commission (31/07/2018)


The credibility of any tax blacklist depends on a number of critical factors. Does it have a clear objective which can effectively be achieved?  Is the process impartial, transparent and fair? Is it internationally acceptable – and accepted? To each of these questions, we can confidently answer ‘yes’ for the EU list of non-cooperative jurisdictions, which Member States agreed to for the first time in December 2017.

The new EU list was conceived to rectify a sub-optimal situation in Europe, where every Member State had its own approach to blacklisting (or not). The patchwork of national lists created uncertainty for companies and third countries and sent mixed messages regarding EU expectations on tax matters. Often, the criteria, process or sanctions for the national lists were unclear. Sometimes third countries were not even aware that they had been listed by a Member State. The common EU list, therefore, was a means of creating a more robust, more coordinated and more credible instrument to tackle external threats of base erosion.

From the outset, the purpose of the EU list was clear. It was never meant to be a purely punitive tool. Rather, the EU listing process was designed to prompt new interaction with jurisdictions on tax matters, and to raise the bar of tax good governance globally. In this respect, it has been a success so far. The EU raised its concerns with third countries regarding their tax systems through a screening and dialogue process, and discussed how shortcomings could be addressed. As a result, dozens of jurisdictions have now committed to remove harmful regimes, upgrade their transparency standards and/or introduce measures to prevent aggressive tax planning through their territory by the end of 2018. The fact that so many countries made high level political commitments to improve their tax standards as a result of the EU list, is proof of its global credibility. 

The EU list is also credible because of the high priority that was given to making it open, objective and fair at every stage. There was no favouritism when it came to countries; the widest possible approach was taken. More than 200 jurisdictions – big and small, rich and poor – were examined initially, through a neutral economic scoreboard. On this basis, Member States identified 92 jurisdictions for further examination, among which were 15 out of the 20 non-EU countries with the highest GDP. Those countries were immediately notified and the criteria were clearly explained. Importantly, the criteria were internationally recognised and aligned to global norms. The EU worked closely with the OECD at every stage of the listing process to maintain this close link with the global agenda.

Transparency has been important in the EU listing exercise too. It allows the public, stakeholders and third countries to see that the process is fair and objective. It also creates additional scrutiny on the jurisdictions that have promised to make improvements. The latest transparency move has been to publish jurisdictions’ commitment letters, with their consent. As such, the concrete results that were promised through this listing process can be freely measured and monitored.

The final step in securing the credibility of the EU list will be to maintain its dynamic nature. Interaction with our international partners on good tax governance issues must continue. Listing criteria must evolve with new developments. Defensive measures must be further strengthened and coordinated. The Commission will be supporting Member States in this work – now and in the future – to uphold the credible and fair listing process that the EU can be proud of.

* Disclaimer - The views expressed in the article are solely those of the authors and do not necessarily reflect the views of the European Commission.