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CURRENT STATUS OF THE FIGHT AGAINST TAX HAVENS IN EUROPE
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Sanctions and counter-measures against
territories included in the blacklist
The issue of sanctions and counter-measures as-
sociated with inclusion in the blacklist is of the
greatest importance, and is also highly contro-
versial. It is fundamental to the willingness of
grey list jurisdictions to address the “deficien-
cies” in its tax policies detected by the EU.
For some Member States, such as Ireland or
Luxembourg, inclusion in a European blacklist
would be sufficient in itself. There would be no
need for additional measures. This is the OECD’s
“name and shame” system, in which the juris-
dictions evaluated as “non-compliant” in the
peer review process are identified and stigma-
tized at the G20. However, without wishing to
underestimate the potential impact of this, the
peer review system does not always appear to
have led to radical reforms by the jurisdictions
concerned.
The EU had expected a set of sanctions to be
agreed before starting the screening process, at
the start of 2017. But it was not possible. When
the first list was published by ECOFIN December
2017, the Member States had still only man-
aged to achieve a “general approach” on the
issue of sanctions for listed countries. The
Commission, aware of the insufficient nature of
its commitment, has urged Member States to
develop a “more binding and definitive” ap-
proach in this area over the course of 2018.
In particular, this general approach distin-
guishes between (non-fiscal) counter-measures
applied by the EU and counter-measures by
Member States. With respect to the former,
ECOFIN establishes that certain EU funds
7
may
7
The European Fund for Sustainable Development (EFSD),
the European Fund for Strategic Investment and the Man-
dates for Foreign Loans.
not be channelled to countries included on the
blacklist. At the same time, the Commission is
already taking the list’s existence into considera-
tion in some of its legislative proposals. So, for
example, the new proposal on country by coun-
try reporting requires that this type of reporting
be public for the subsidiaries of multinationals
located in the EU or “which are located in ter-
ritories on the European blacklist”. Subsidiaries
with a presence in unlisted non-EU territories
are exempted from these stricter reporting re-
quirements. At the same time, the Commission
is currently examining legislation in other policy
areas to identify how to introduce more mean-
ingful consequences for listed jurisdictions.
In general terms, the EU should use all of its
capacity as a major economic power, linking the
blacklist to other aspects of foreign policy, trade
relations and development aid. Inclusion on this
list should, where applicable, entail the suspen-
sion of any free trade agreements with the EU,
and any trade agreements signed by the EU
with third-party countries should, in future, in-
clude good tax governance clauses. Companies
that use these territories without justification
(for an activity that is unrelated to the purpose
of the business) should be penalized in European
tender processes and excluded from access to
European funds and investment programmes.
But ECOFIN December 2017 does not only
refer to sanctions to be imposed on blacklisted
countries by the EU. It also agreed a list of coun-
ter-measures that Member States “may” apply
to territories on the blacklist, while at the same
time insisting on the importance of these meas-
ures being applied in a coordinated manner by
all Member States. These include raising the au-
dit requirements for companies with a presence
in these territories, withholding cash flows to-
wards European tax havens and limiting the ex-
emptions available to companies that use these