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EU governments are on the brink of agreeing a tax haven blacklist that could ensure corporate tax havens face international sanctions for the first time. This is a welcome move if the list includes objective and comprehensive criteria instead of focussing solely on opacity of tax systems, said Oxfam today. The organisation is calling on EU member states to ensure the blacklist criteria are sufficiently robust for the list to be a useful tool in the fight against tax dodging.
EU finance ministers will meet in Brussels tomorrow to discuss, and potentially adopt, criteria for producing a European blacklist of tax havens along with a shortlist of countries to be assessed against these criteria.
While proposals for the EU blacklist are a distinct improvement over other lists – including a planned G20 blacklist – Oxfam has a number of concerns about it:
- The EU has already made clear the blacklist will not include EU countries. This means several EU member states identified by Oxfam as being corporate tax havens – among them the Netherlands, Belgium, Cyprus and Luxembourg – will not feature on the list.
- Many EU leaders are also willing to exclude countries such as Switzerland because it is engaging with the EU on issues relating to financial transparency – despite the fact that Switzerland is also an obvious corporate tax haven.
- The EU blacklist may also exclude notorious tax havens such as Bermuda if member states fail to agree on a zero percent corporate tax rate as a key criterion for the list. Research by Oxfam found that US multinational companies reported US$80billion in profits in Bermuda - more than their profits reported in Japan, China, Germany and France combined.
Esme Berkhout, tax policy advisor for Oxfam said:
“Tax havens are helping big business cheat countries and their citizens out of billions of dollars in tax every year. By starving countries of money needed for education, healthcare and job creation tax havens are exacerbating poverty and inequality across the world.
“If the EU blacklist is to be a useful tool in the fight against tax dodging, and not just a gimmick, politicians can’t afford to fudge it. Tax blacklists can only work if they are based on objective, comprehensive criteria - including whether or not countries are offering zero rates of corporate tax and other unfair tax incentives.”
Notes to editors
- EU finance ministers, who are meeting in Brussels this Tuesday, are expected to approve the criteria for screening non-EU jurisdictions, the list of jurisdictions to be screened, and the procedural guidelines on how the screening should be conducted. The final EU blacklist is expected to be published towards the end of 2017.
- EU finance ministers are also set to discuss moves towards a common consolidated corporate tax base (CCCTB) – common rules to calculate what income should be taxed by EU countries. This proposal is a welcome step in reducing tax competition across the EU, but it will not address the dangerous race to the bottom on corporate tax.
- Tax havens offer companies a series of opportunities to pay a minimal amount of tax. These include: zero or extremely low corporate tax rates, high levels of financial secrecy, the provision of unfair and unproductive tax incentives, and a lack of effective rules to prevent profit shifting to other tax havens.
- In May 2016, Oxfam released “The Netherlands: a tax haven”, an analysis of European Commission data. The report shows that the Netherlands, as well as Belgium, Cyprus and Luxembourg, are top EU tax havens for corporations.
- In March 2015, Oxfam published “Pulling the Plug – How to stop corporate tax dodging in Europe and beyond”, a briefing note that explores ways to fight corporate tax avoidance in the European Union. It explains why it is vital for the EU to adopt legislation against tax dodging as soon as possible.
- In November 2015 Oxfam, TJN, GATJ and PSI published “Still Broken”. This report found that in 2012, US multinationals alone shifted $500–700bn, or roughly 25 percent of their annual profits, mostly to countries where these profits are not taxed, or taxed at very low rates. Most of this money ends up in a handful of countries including the Netherlands, Luxembourg, Ireland, Bermuda and Switzerland.
- While Switzerland will phase out its existing preferential regimes for foreign multinationals, it will replace it with a lower general tax rate, a patent box, and other tax incentives in 2019.
- Oxfam analysed 200 companies, including the world’s biggest and the World Economic Forum’s strategic partners, and has found that nine out of ten of the world’s biggest companies use tax havens.
- Oxfam’s report “Broken at the top” found that the 50 biggest US companies have more than a trillion dollars hidden offshore.
- The “World Investment Report” of the United Nations Conference on Trade and Development (UNCTAD) estimates that developing countries lose at least US$100 billion per year in corporate tax revenue due to tax dodging by large companies. This money could ensure that every one of the 121 million children globally who are currently out of school get an education and provide healthcare services across Africa that could save the lives of 4 million children.