Tax haven blacklist omits Luxembourg [but includes Cayman Islands] as Brussels announces reform plans

By Simon Bowers and Arthur Neslen From The Guardian UK

European commission continues drive to combat ‘sweetheart deals’ granted to multinationals but critics say watered down proposals may open new tax breaks
‘We are using outdated tools to respond to the challenges of a digitalised, globalised economy,’ said Pierre Moscovici, the European commissioner with responsibility for tax.

A blacklist of the world’s 30 worst-offending tax havens, published on Wednesday by the European commission, includes the tiny Polynesian island of Niue, where 1,400 people live in semi-subsistence — but does not include Luxembourg, the EU’s wealthy tax avoidance hub.

Niue, situated east of Tonga in the Pacific Ocean, has appeared on tax haven lists before. But the island, which has an economic output estimated at just $10m (£6.3m) a year, has rarely been cast as a major threat to the tax receipts of Europe’s largest economies.

The list also includes various well-known havens — among them the Cayman Islands, British Virgin Islands and Guernsey — but other jurisdictions that are commonly labelled as offshore tax avoidance hubs were notably missing. Jersey and Switzerland, for example, were not named.

Within Europe, Monaco, Lichtenstein and Andorra made it onto the blacklist. The commission explained, however, that the list of 30 “non-cooperative jurisdictions” was designed only to assess non-EU members. As a result, the new register does not include countries such as the Netherlands, Ireland, or Luxembourg — all of which are under investigation by the European competition authorities, suspected of offering “sweetheart” tax deals to multinationals.

The industrial scale on which Luxembourg — one of the richest per capita countries in the world — was facilitating the tax avoidance ploys of large corporations was laid bare last year in the LuxLeaks scandal.

Many years earlier, Luxembourg’s aggressive tax policy had been shaped by the Jean-Claude Juncker. Juncker is now president of the European commission, having served as prime minister of the Grand Duchy for 18 years.

In March, the commission responded to the LuxLeaks scandal by insisting EU tax authorities share with one another the tax rulings they privately grant to multinationals.

Six of the 30 tax havens named by the commission were British overseas territories — Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Montserrat, and the Turks and Caicos Islands — but only one crown dependency, Guernsey, made the list. Twenty-one were small island economies, mostly in the Caribbean Sea, Pacific Ocean or Indian Ocean.

Each country on the blacklist had been suggested by at least 10 EU member states as problematic. The UK did not make any suggestions, nor did Germany.

Brussels hopes that the list will help member states put pressure on commonly recognised pariah jurisdictions.

The register was announced alongside more substantive plans for reforming the way in which multinationals are taxed across the EU, a framework proposal known as the common consolidated corporate tax base, or CCCTB.

Pierre Moscovici, European commissioner with responsibility for tax, said: “Our current approach to corporate taxation no longer fits today’s reality. We are using outdated tools and unilateral measures to respond to the challenges of a digitalised, globalised economy.”

The CCCTB measure will look to harmonise corporate income tax rules among member states in a further effort to combat aggressive tax avoidance. As expected, Moscovici conceded that — in the first instance at least — the controversial “consolidated” element of the tax reforms would have to be delayed.

His more politically palatable compromise plan seeks to find common ground for the tax treatment of multinationals, making it harder for corporations to build complex structures and transactions between member states that artificially depress tax liabilities.

Tax campaigners, however, were quick to raise concerns that the compromised proposals, rather than clamping down on corporate tax avoidance, risked opening up a major new front for tax planners to exploit.

In particular, they noted that, in its watered down form, the CCCTB proposal permitted multinationals to offset losses in one EU jurisdiction against profits in another — a tax break that is currently unavailable.

John Christensen, director of the Tax Justice Network, said: “The European commission is offering multinational corporations the best of both worlds, and the public will be the losers: the commission proposes to allow cross-border offset of losses without preventing intra-group profit shifting. This widens the possibilities for tax avoidance.”

The commission is understood to be alive to campaigners’ concerns and remains confident of warding against such avoidance strategies by ensuring any directive is tightly drafted. Moscovici conceded that the compromise proposal was not ideal, but had been necessary due to fierce opposition from some member states to the full, consolidated version of CCCTB.

Asked if he felt there was sufficient political will among all member states — including those such as Ireland, Luxembourg, Belgium and the Netherlands, which are associated with more controversial tax treatments — for substantive measures to tackle corporate tax avoidance, Moscovici pointed to parallel crackdowns and national level and at the level of the G20.

“I am tempted to quote Bob Dylan,” he said. “‘The times they are a-changin’’”.

IMAGE: ‘We are using outdated tools to respond to the challenges of a digitalised, globalised economy,’ said Pierre Moscovici, the European commissioner with responsibility for tax. Photograph: Francois Lenoir/Reuters

For more on this story go to: http://www.theguardian.com/world/2015/jun/17/luxembourg-tax-haven-blacklist-brussels-european-commission

Cayman Finance statement on EU Blacklisting
Cayman Finance is disappointed to read that the Cayman Islands has today been included on a list (based on the views of 11 EU countries with which Cayman does little international business) implying that we might be non-compliant regarding tax good governance.

It is not clear what standards have been used by these 11 countries to come to such a conclusion, in particular when the Cayman Islands has exchange of information mechanisms in place with all but one of these countries.

The Cayman Islands has consistently evolved and maintained its international tax cooperation practices to meet robust, balanced and globally implemented standards for regulation and cross border cooperation that apply equally to G20 countries and all International Financial Centres. This has been consistently reaffirmed in FATF and Global Forum assessments.

In addition, the Cayman Islands has consistently acknowledged its important role in the global financial market by signing up as an early adopter of Automatic Exchange of Information arrangements such as the OECD’s Common Reporting Standards and UK and US FATCA.

We are confident that if these 11 EU countries transparently and objectively evaluate the Cayman Islands robust international tax cooperation regime against global standards that the Cayman Islands will be promptly removed from this non-compliant list.

Statement from the Minister of Financial Services, Wayne Panton

The Cayman Islands Government is aware that the EU’s blacklist is based upon the individual, national blacklists of EU countries. However, we also are aware that major European economies, which have been rated similar to the Cayman Islands on upholding international standards on transparency, do not list our jurisdiction.

The national blacklists that have resulted in this overall blacklisting are primarily generated by European countries that are not major economic trading partners of the Cayman Islands. These countries therefore may not be aware of Cayman’s adherence to standards, both in terms of our bilateral and multilateral agreements for exchange of information.

Save for Bulgaria, we have EOI mechanisms with all of the jurisdictions that have blacklisted Cayman.

It is unfortunate that the EU black list unfairly downplays the significant strides made by Cayman, as well as the significant global accomplishments in the area of transparency.