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EU must ensure tax haven blacklist is not a whitewash

The EU should resist political pressure and ensure its upcoming blacklist of tax havens objectively reflects the criteria it has itself set if it is serious about fighting tax avoidance, Oxfam said today.

The international organisation said that an honest appraisal of the role that different states play in facilitating tax dodging is crucial if European countries are to effectively tackle a problem that deprives them and poor countries of vital funds that could be used to fight poverty.

Oxfam’s new report, Blacklist or Whitewash?,   names the 35 countries that should feature according to the EU’s definition of a tax haven, including six that are linked to the UK: the British Virgin Islands, Cayman Islands, Bermuda, Jersey, Gibraltar and Anguilla.

The EU has excluded member states from its blacklist. Oxfam is also urging the EU to act to reform the tax systems of countries like Ireland, Luxembourg, the Netherlands and Malta, which it found met the criteria for being tax havens.

The EU is expected to publish its blacklist next Tuesday after analysing 92 countries and jurisdictions against criteria including financial secrecy and facilitating profit shifting – but political pressure from inside and outside the EU means some of the world’s most notorious tax havens, such as Switzerland, may be left out.

Oliver Pearce, Oxfam’s Tax Policy Advisor, said:

“If the EU is serious about preventing tax havens from engaging in harmful practices that affect us all then it should stand up to political and corporate pressure and create a genuine blacklist, not a whitewash.”

Last year more than 300 top economists, including Nobel Prize winner Angus Deaton, warned there is no economic justification for tax havens and urged world leaders to take on the powerful vested interests that benefit from the status quo.

Oxfam is calling on the UK government to take responsibility for its own offshore backyard by requiring Britain’s overseas territories and crown dependencies to publish registers revealing the real owner of companies registered there. None has yet complied with the Government’s request to do this, first made by David Cameron in 2013. Private registers are not an adequate substitute as they would not be open to full scrutiny, especially by authorities in poor countries.

Oxfam’s report highlights how multinationals are able to use the UK’s overseas territories to shift profits through interest payments on artificial loans between their subsidiaries. Income from interest represented 73 percent of GDP in the Cayman Islands and 40 percent of GDP in Bermuda.

Pearce added: “People are fed up with double standards that mean some companies and wealthy individuals can funnel money through tax havens to avoid paying their fair share of tax, while ordinary people in the UK and overseas are struggling to get by. With growing cross party consensus on this, the Government should not delay further action to end tax secrecy in UK-linked tax havens and to require UK-based multinationals to publish their tax payments in every country they operate.”

The EU’s tax haven blacklist is being drafted in secret, which makes scrutiny impossible. Malta has publicly lobbied for an empty list and the Swiss government has announced it does not expect Switzerland to be included.

Oxfam believes the EU’s blacklist criteria are a step in the right direction but should be extended to address other harmful tax practices such as the race to the bottom on corporate tax rates.

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