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THE STATE OF THE EUROPEAN UNION
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Towards a European definition of a tax
haven which goes beyond the concept of
banking secrecy
As we have seen, the first criterion of the
European list of tax havens is based on the
OECD definition of a tax haven, which coincides
with the concept of “secrecy jurisdictions”. This
identifies tax havens as those jurisdictions which
do not exchange information with other territo-
ries and whose purpose is to attract the private
wealth of individuals, guaranteeing a level of
secrecy which permits them to conceal both
their identity and their money.
However, as we will see below, the second
and third criteria for the European list go be-
yond this very limited definition of a tax haven
to consider the notion of “corporate tax ha-
vens”. These are territories which compete to
attract the profits of companies (typically trans-
national corporations) despite the fact that
these profits have been generated elsewhere. To
do this, they offer special tax regimes designed
to attract particular types of company or income
source. Large companies thus have the oppor-
tunity to exploit the loopholes and benefits of-
fered by certain jurisdictions and, by stretching
their interpretation of the law to the limit, they
can significantly reduce their tax liabilities. In
contrast with secrecy jurisdictions, which favour
tax evasion, here the issue is one of aggressive
tax planning and corporate tax avoidance.
However, it is also true that at times the grey
line that separates avoidance from evasion is
difficult to identify.
The criterion of fair taxation
The second criterion on the European list – fair
taxation – has several implications. In the first
place, it requires that the tax system of the juris-
diction under evaluation does not contravene
the principles of the OECD’s Forum on Harmful
Tax Practices or the principles of the EU’s Code
of Conduct for Business Taxation. Both initia-
tives were developed at more or less the same
time: the OECD Forum was held in 1998 and
the EU Code of Conduct was drawn up in 1997.
It is important to note how the concept of
tax haven used by the OECD has developed over
time. When the Forum on Harmful Tax Practices
was held, the OECD adopted the definition of a
corporate tax haven described above, which
was heavily based on the existence of harmful
tax practices which undermined the tax base of
other countries. Subsequently, the OECD shifted
towards a definition that focused exclusively on
the idea of information exchange (secrecy juris-
diction). This was due to the influence of the
Clinton and Bush administrations, which were
far more interested in obtaining information
about current accounts held by their nationals
abroad than in eliminating the tax benefits of-
fered to large transnational corporations (many
of which were American) across the globe.
The EU, in contrast, has never abandoned its
focus on combatting harmful tax practices, al-
though with a low-profile approach which one
can only hope will be strengthened with the im-
plementation of the new European list of tax
havens.
Along with establishing the Code of
Conduct, ECOFIN December 1997 created the
Code of Conduct Group with a dual mission: to
dismantle existing harmful tax regimes and to
evaluate potentially harmful new regimes. The
Group has continued to perform this task, with
varying degrees of success, until the present
day. Both the Commission and some Member
States have criticized the fact that the parame-
ters used by the Group to perform this work
have not been updated sufficiently and have