EU removes Seychelles from blacklist of tax havens despite revelations from Pandora Papers
The European Union has decided to remove Seychelles from its official blacklist of tax havens, despite the archipelago being named as one of the top destinations for offshore companies in the Pandora Papers, a huge trove of leaked data exposing the transactions. secrets of the wealthy elites.
Tuesday’s decision comes as the economy and finance ministers of EU countries gathered in Luxembourg for a two-day meeting to discuss a wide range of issues such as economic recovery, soaring energy prices and the recent rise in inflation.
The EU updates its list of tax havens twice a year and the review has already been decided before the International Consortium of Investigative Journalists reveals the fraudulent tax schemes that politicians, billionaires and celebrities use to buy goods and hide their assets. But the coincidence of the two announcements cast doubt on the bloc’s efforts to tackle tax evasion.
Based on confidential files from 14 offshore service providers, the Pandora Papers describe a complex web of shell companies, trusts and foundations that allow owners to conceal their identities from the public and even regulators. Newspapers point to low and no tax jurisdictions such as Seychelles, British Virgin Islands, Hong Kong, Belize, Panama and South Dakota as some of the more common destinations for these obscure entities.
Seychelles has now been removed from the list of EU tax havens, along with two Caribbean islands, Anguilla and Dominica. EU ministers took the decision after the Organization for Economic Co-operation and Development (OECD) ruled that the three archipelagos were entitled to an additional review to assess their compliance with international standards for tax transparency and tax compliance. ‘exchange of information.
Last year, the Seychelles has been downgraded from “broadly compliant” to “partially compliant” when the OECD expressed concerns about the availability and access to information in its offshore sector – the same sector exposed by the Pandora Papers as fertile ground for the ‘tax evasion.
Seychelles, Anguilla and Dominica could be put back on the EU reserve list if the OECD review does not improve their current status.
“The blacklist is a sham”
With the latest update, the list of EU tax havens grows from twelve to nine territories: American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu. Of all this, only Panama matches the revelations of the Panama Papers.
Brussels does not qualify these countries as “tax havens” and instead uses the less controversial term “uncooperative jurisdictions” supposed to “encourage abusive tax practices, which erode the tax revenues of member states”.
Created in 2017 to fight against tax fraud and money laundering, the blacklist is based on three criteria: transparency of information, fair tax competition and the implementation of the OECD minimum standards on base erosion and profit shifting (BEPS), a set of international rules aimed at curbing the transfer of profits from higher tax jurisdictions to lower tax jurisdictions.
The device can spare countries with zero corporate tax rates if they ensure “that it does not encourage artificial offshore structures without real economic activity”.
In addition to blacklisted territories, the EU is also compiling information on countries with questionable tax governance. First, countries that cooperate with the EU and have already implemented tax reform commitments, like Belize and the British Virgin Islands, which are mentioned in the Panama Papers, as well as neighbors of the EU like Switzerland, Andorra, San Marino and Serbia.
Second, countries that have committed to reform but do not yet fully comply with EU criteria. This group includes names like Hong Kong, North Macedonia, Costa Rica, Qatar and Turkey, and are given different deadlines to adapt their laws and eradicate their damaging tax regimes.
Since its entry into force, the blacklist has been criticized by policymakers and civil society for being too narrow, too lenient and too weak. The program only targets countries outside the European Union, exempting member states like the Netherlands, Luxembourg, Ireland and Malta, which are often described as tax havens by international advocacy groups.
“The blacklist is a shame, it is a sham,” Paul Tang, a Dutch MEP who chairs Parliament’s sub-committee on tax matters, told Euronews.
“That doesn’t include the British Virgin Islands, Cayman Islands or Bermuda. So the big offshore countries – big in terms of tax evasion and money laundering – are not on the list. a perfectly fine instrument that was performed very poorly and doesn’t really work. “
Despite criticism, the EU believes that the blacklist and the publicity it generates can be used as a tool to promote tax reform around the world. But the criteria underlying the index have inherent weakness and fairness problems that allow glaring omissions, says Chiara Putaturo, Inequality and Tax Policy Advisor at Oxfam’s European office.
“Countries with zero tax rates like Anguilla for example should be automatically blacklisted. This is not the case now. Then we should look at the actual activity of companies. If, for example, there is has a level of profit or income, like in the Cayman Islands, that is disproportionate to the employees of a company, so this country needs to be looked at carefully, ”Putaturo told Euronews, adding that his organization was again disappointed with the updated list.
“Often times we see that there are shell companies, letterbox companies, with very few employees but high profit levels, and that should be a wake-up call for a suspicious practice of tax evasion. “
Political storm and global reform
The Pandora Papers have once again revived the public debate on the illegal privileges enjoyed by elites. The investigation has put several European leaders under fire, including Czech Prime Minister Andrej Babiš, Cypriot President Nicos Anastasiades, President of Montenegro Milo Djukanovic, Ukrainian President Volodymyr Zelenskiy and former British Prime Minister Tony Blair.
Politicians are accused of using offshore structures and trusts to pay little or no tax and keep luxury items and bank accounts hidden from public authorities.
“I am not surprised but still shocked that there are a lot of people, politicians, the Czech Prime Minister, the Dutch Minister of Finance, bankers, celebrities like Shakira, rubbing shoulders with well-known criminals,” he said. he added. noted. “To see this underworld come so close to the normal world, I still find it a bit shocking. “
Wopke Hoekstra, the Dutch Minister of Finance, appears in the newspapers as having invested € 26,500 through a company based in the British Virgin Islands. Hoekstra said on twitter he was not directly involved in the operations of the company and had sold his shares before taking up his current position. He also admitted that he should have paid more attention to his financial transactions.
But the minister’s statement was not satisfactory enough for Manon Aubry, a French MEP who sits with the La Gauche group. Speaking to Euronews in Strasbourg, Aubry condemned Hoekstra for his participation in the Luxembourg meeting which gave the green light to the latest update of the EU tax blacklist, despite being himself named in the Pandora Papers.
“Someone who dodges taxes teaches the poor to pay for the crisis and decides which countries should or should not be on the list of tax havens,” she said.
“[Someone] invest money directly in the British Virgin Islands and then decide that the British Virgin Islands are not on the EU’s list of tax havens. It’s a big conflict of interest, so he should resign, “she added.
Aubry also lambasted Prime Minister Babiš and President Anastasiades, who are members of the European Council and therefore decide the political direction of the EU – with veto power. Both leaders denied any wrongdoing. Babiš described the Pandora leaks as an attempt to influence the Czech parliamentary elections, scheduled for this weekend.
“I think the solution is for these people to be deported because when it comes to tax evasion, we have the solution: transparency, a credible list of tax havens and a common tax base at EU level for them. ensure that multinationals and billionaires are paying their fair share of taxes, ”Aubry said.
The political storm unleashed by the Pandora Papers not only coincides with the EU’s tax blacklist, but also with a global tax reform effort that is set to merge later this month when world leaders meet. in Italy for a G20 summit.
The draft agreement, backed by countries representing 90% of global GDP, is based on the OECD’s two-pillar system which emphasizes partial reallocation of taxing rights and rate-setting minimum effective tax of 15% for profits obtained by large multinationals. The OECD estimates that the reform could generate more than $ 250 billion per year in additional tax revenue.