By Eli Moskowitz From OCCRP

Despite its status as one of the world’s most secretive and low tax jurisdictions, the European Council announced on Tuesday that it has delisted the Cayman Islands from the EU’s list of non-cooperative jurisdictions for tax purposes – informally known as its tax haven blacklist.  

This decision added fuel to the fire for critics who have argued that the criteria for listing is flawed, arbitrary, and perhaps even politically motivated. 

“This is an extraordinary decision, and hard to know whether it’s testament to the lobbying efforts of the world’s worst financial secrecy jurisdiction, Cayman, or the sheer methodological ineptitude of the EU blacklist,” Alex Cobham, Chief Executive of the Tax Justice Network wrote on his Twitter account.

His organization’s Financial Secrecy Index, which ranks jurisdictions according to their secrecy and scale of offshore financial activities, lists the British overseas territory as the world’s worst tax haven. It also determined it to be the third greatest enabler of corporate tax avoidance behind only the British Virgin Islands and Bermuda, according to its Corporate Tax Haven Index.

According to Tuesday’s European Council press release, the Cayman Islands was delisted “after it adopted new reforms to its framework on Collective Investment Funds in September 2020.” 

It was one of two jurisdictions, along with Oman, to be removed from the EU list, which was first established in December 2017, and is updated twice a year. 

Cayman’s Premier, Alden McLaughlin, welcomed the decision, saying that his government remains committed to good governance standards on this issue, and that he “will continue collaborating with the EU, including through broadening our dialogue to topics of mutual interest.”

As reported by the BBC, the islands became the first U.K. territory to be added to the blacklist in February of this year. Upon receiving the news, its government released a statement saying that it was already in discussions with EU officials to be delisted as soon as possible.

Oxfam, an international NGO, found the news of the Cayman’s blacklisting to be “encouraging” at the time, but stated that there were many other tax havens that should have been included. 

In response to this development, Chiara Putaturo, Oxfam’s EU Tax Policy Advisor, said that “removing the Cayman Islands, one of the world’s most notorious tax havens, from the EU tax haven blacklist is further proof that the process isn’t working.” 

“Tax havens deprive rich and poor countries of hundreds of billions in lost revenue every year – money that is needed more than ever during the COVID-19 pandemic. Yet instead of holding them to account the EU is allowing the most aggressive countries to be delisted,” she said.

The comments from the organization follow its press release from Monday, one day prior to the Commission’s updated list, where it released findings showing that the EU blacklist is undermining efforts to inhibit corporate tax dodgers from receiving millions in government bailout funds intended to alleviate losses incurred from the coronavirus pandemic. 

Despite stated efforts by certain EU member states to block funding to companies relying on tax havens, along with a similar recommendation from the EU itself, Oxfam found countries like Denmark have shelled out 89 million euro (US$104.89 million) in state aid to corporations that had not paid taxes in the country. 

This was anticipated by Duncan Wigan, a professor at the Copenhagen Business School, who told OCCRP in April – at the time that Denmark stated its commitment to blocking tax haven linked corporations from receiving bailouts – that the proposal was likely to be toothless if it were based on what the EU’s criteria for what qualifies as a ‘tax haven’.  

“If the restriction applied to Danish companies that maintained entities in one of a broader range of jurisdictions that many consider to be ‘tax havens’, including key European jurisdictions, it would bar the vast majority of Danish companies that operate internationally from receiving state support,” Wigan said. 

Oxfam noted that certain European countries which it considers to be tax havens, have also played a role in exacerbating the issue of wide scale tax avoidance.  

Citing a recent report from the Centre for Centre for Research on Multinational Corporations, Oxfam noted that Qiagen, a German company that is one of the largest producers of coronavirus test kits in the world – which has also received millions in state funding – has managed to avoid huge sums of its tax burden by shifting its profits to various tax havens, including a total of $105 million by setting up its headquarters in the Netherlands.  

EU member states such as The Netherlands – which costs the EU an estimated $10 billion in corporate taxes each year – cannot be blacklisted by regulators given that they are legally prohibited from listing EU member states.  

“If the blacklist is to retain any credibility the EU must include all countries that operate as tax havens – including countries with zero corporate tax rates and countries where corporate investments outstrip the level of real economic activity they engage in,” said Putaturo of Oxfam.  

“It is essential that the European Commission and the Council fill these gaps – this should be top of the agenda when it reviews the definition of harmful tax regimes next year,” she concluded.

For more on this story go to: OCCRP