EU blacklist of tax havens coming within six months

| 03/05/2016 | 24 Comments
CNS Business

MEP Jeppe Kofod

(CNS Business): A European-wide blacklist of non-cooperative tax jurisdictions is definitely coming and will be announced within six months, according to EU officials. Member of European Parliament (MEP) Jeppe Kofod, who is part of the TAXE2 Committee that a delegation from Cayman recently appeared before, confirmed to CNS Business that an EU blacklist for non-cooperative tax jurisdictions is a priority for the European Commission.

“I am absolutely confident that the European Commission will have to deliver upon this, and that they will have to deliver soon,” Kofod said. “The European Parliament has called for such a list for a long time and Commissioner Moscovici has now committed himself to delivering within a six month time period.”

If Cayman were to be included on such a list, it would be a hammer blow for the financial services industry, which has spent the last few years bending over backwards to implement every OECD initiative required on tax information exchange and transparency, as well as the government striking the recent agreement with the UK on the sharing beneficial ownership information.

Kofod, who is a member of Denmark’s Social Democratic delegation to the European Parliament, said Cayman’s potential inclusion on any EU blacklist would really depend upon its own actions.

“If the Cayman Islands’ authorities comply with OECD requirements, primarily BEPS-criteria (Base Erosion and Profit Shifting) and engage in an open and forthright dialogue with European authorities on access to financial, tax and company related information, then no. If, on the other hand, we do not see sufficient movement and willingness to engage, then the Cayman Islands may very well end up on this list,” he said.

On returning from his recent trip to Brussels and appearance before the European Parliament’s TAXE2 Committee (Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect), Financial Services Minister Wayne Panton had said that the comments from some of the politicians indicated a return to the blacklists of the 1990s, where countries were penalised for their internal tax systems.

Taking aim at tax havens, some MEPs said they believe that a blacklist of uncooperative tax jurisdictions would not be enough to tackle the aggressive tax planning activities highlighted by the Panama Papers leak and have called for measures that go beyond ‘naming and shaming’.

“These leaks show there are still loopholes that need to be clamped down on,” said Stephen Quest, Director-General of the Directorate-General for Taxation and Customs Union at the European Commission. Quest said during the TAXE2 Committee discussions that sanctions against blacklisted countries rarely progressed.

“The first sanction is the public disapproval of being listed, and that’s actually quite effective,” he said.

On the matter of sanctions, Kofod said, “At present, a wealth of different options is being debated, ranging from complete economic, political and diplomatic boycotts to special withholding-taxes on transfers to countries on the blacklist. However, a consensus on the exact sanctions and measures to be applied has yet to be found.”

In response to calls for tougher measures from Europe against jurisdictions considered tax havens, including the threat of sanctions, local industry experts said that any new European-wide blacklist that included the Cayman Islands would have zero credibility.

Paul Byles, offshore industry expert and director of First Regents Bank and Trust, said blacklists in the past were created on the basis of perceived weakness in regulatory or transparency frameworks.

“Given the significant amount of resources invested into improving Cayman’s regime in both areas over the past 15 years, it’s hard to imagine that a new European blacklist could include Cayman with any credibility or objectivity,” he said. “It’s easier to anticipate a blacklist based solely on the fact that countries have low taxes or indirect tax regimes but that would be purely politically motivated.”

Political motivation, however, in the current climate has clearly reached fever pitch, with the Panama Papers following similar leaks from Luxembourg and Switzerland, which MEPs said had focused public attention on the issue.

The TAXE2 Committee discussions take place as EU politicians examine the various measures introduced to crack down on aggressive tax planning and consider what more could be done to tackle the loss of tax revenue, estimated by the European Parliamentary Research Service to cost €50-70 billion each year.

From the Cayman perspective, Byles also noted that despite popular opinion, tax levels in Cayman are actually pretty high, as they are in other countries, taking into account the amount of indirect taxes and fees paid by Cayman residents and companies.

“The larger concern for Cayman is not a possible future blacklist; it’s giving consideration to whether the financial services products that have taken us this far can still provide a sustainable industry and careers for young Caymanians in the longer term, given the increasing pressures on those services,” he said.

Minister Panton had also said that a great deal of time was spent explaining to the committee how Cayman’s system of indirect taxation actually worked, along with what he felt was some misinformation generated by the Tax Justice Network.

Kofod said the TAXE2 Committee was pleased to see that Cayman Islands ultimately decided to present themselves to the committee.

“Dialogue and transparency are key for progress,” he said. “I do understand the tax system, but during the exchange of views it was presented as Cayman Islands´ business model. I don’t look at countries and societies as business models. They are communities of people, not aimed at attracting corporations and definitely not to do so to the detriment of other countries.”

When asked what he thought was the biggest problem with the Cayman Islands, Kofod said in his view it is transparency and cooperation.

“The Cayman Islands need tighter control of the beneficial ownership, keep track of ultimate beneficial owners, and maintain public registers of beneficial ownership of companies and trusts located in the Cayman Islands,” Kofod said.

Since the Panama Papers leak, industry groups in Cayman and in what would be considered to be the other leading offshore centres have gone to great lengths to distance themselves and expound the benefits and major differences in their regulatory systems with Panama.

This credibility gap, however, will still ultimately need to be judged and determined by EU officials in their own analysis of the situation. Furthermore, the recent agreement announced by the Cayman government on sharing of beneficial ownership information applies only to the UK and not to the EU and still doesn’t go far enough to satisfy many European officials.

Kofod said each jurisdiction will have to be judged and assessed on its own merits.

“There is, of course, differences between Panama and the Cayman Islands,” he said. “There is no doubt that the Cayman Islands have moved substantially on this issue in the past years, and I very much welcome any and all movement related to exchange of information on beneficial ownership. However, this information also has to be shared with all 28 EU Member States and made publicly available.”

During the TAXE2 Committee meetings, MEPs also noted the existence of tax havens within the EU itself, and Kofod believes that the EU also needs to get its own house in order.

“Europe is no saint when it comes to tax evasion and imaginative tax schemes,” Kofod stated in the interview. “The ‘double Irish with a Dutch sandwich’-scheme is well known, as is the fact that we have seen some incredible lucrative mechanisms involving patent boxes in a number of EU Member States. These issues have to be tackled as well.”

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Comments (24)

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  1. Anonymous says:

    Blacklists matter!

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  2. Island Bundy says:

    Meanwhile, those nations do not have a public register. Simply bully tactics.
    Everyone wants their privacy but when you add a few zeros to your bank account everyone thinks they have the right to know your business.

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    • Anonymous says:

      When a much larger host decides to rid itself of a tiny blood-sucking parasite then the parasite is not usually in a great position to object.

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  3. Knot S Smart says:

    If England and the EU keep screwing around with us like this we will be so worn out that we will all have to take Viagra,,.

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  4. Island Bundy says:

    The EU is dying institution. When England leaves the EU will become more tyrannical and will need to be put out of its misery.

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    • Anonymous says:

      Meanwhile in the real world, an EU blacklist would be a whole world of pain and without a public register Cayman is going to be on the blacklist.

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  5. Allar says:

    I am so sick and fu***ng tired of England and the European Parliament just screwing around with Cayman. We have got to be the most compliant in the world. England wants public registry so why don't the have it why don't the USA have it. I am just so fed up of these BULLIES

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    • Anonymous says:

      lets see caymanians feel comfortable lets move the goalpost again but lets ignore whats going on in our country. welcome to big countries rule.

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      • Anonymous says:

        You bet they rule. Did you just figure this out? They, not you, own the goalposts.

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    • Anonymous says:

      The EU is just fed up with tinpot island parasites facilitating tax avoidance on a massive scale.

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      • Anonymous says:

        Please explain how a tinpot island can facilitate tax avoidance on a massive scale compared to say, a New York, London, Delaware, Miami, etc. ?

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      • Anonymous says:

        anon 120 the fact that you are constantly changing the goalposts tells me you have absolutely no idea of how to deal with the problem. the reality is that you have too many dishonest people.

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    • The Watcher says:

      I am sure the European Parliament and England are reassessing their stance now that you have had your princess type tantrum. Don't like? Lead your people to Independence.

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    • Anonymous says:

      The US doesn't intend to have public registries and is not asking you to have one. It's the Europeans who are in a lather about it. It would probably benefit the US for the EU to start public registries.

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  6. anonumous says:

    Will that take place before or after the UK leaves the EU? Tell mr. kofod to go fly a kite and don't let go of the tail.. So sick of the jealous dumb ass people with nothing else to do. " he has founded it upon the seas, no weapons formed against us will prosper, take the plank out of your own eyes before you worry about the splinter in mine, go away, far far away"

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  7. Caymanian realistic says:

    I'm sick and tired calling us a tax haven!!!!
    Please someone explain to these idiots overseas we do pay taxes, just not on our income.
    Sht!!!
    I pay Corp fees, T&B fees, work permit fees, import fees and exorbitant prices for everything else on this island!!! By the way I don't mind paying.

    Why can't someone just take for instance a large law firm or insurance firm. Break down all their costs in Government Fees and show these idiots overseas we do pay taxes.

    This is simply put but it's true!!!!

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    • Anonymous says:

      The point is that the Caymans have cosy little "exempt" companies that do their business outside Cayman and only pay a low few to avoid taxes where the do do business.

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      • Chris Johnson says:

        Surely you mean 'exempted' companies ?

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        • Anonymous says:

          Exempted companies are exempt. That is why they are exempted.

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  8. Anonymous says:

    No public register of beneficial ownership = blacklist. It is that simple since the Panama leak. It might not be fair, but that is the reality of situation.

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  9. Anonymous says:

    Would like to see if the U.S. with worse tax evasion, more lenient AML, and less beneficial ownership information is finally included or if their financial sponsorship to such organizations gives them another free ride.

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    • Anonymous says:

      The US doesn't care what you would like. Any three Mexicans in the US have more stroke than Cayman. You just have to hope that there will still be cracks in its tax laws that you can fit in.

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  10. Anonymous says:

    Mr Kofod & the EU body should ask the U.S. to disclose their beneficial ownership on companies & to offer more ownership transparency ,to also comply. Good luck with that one!!!

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  11. Anonymous says:

    It never ends with these pinko communist European Parliament types. We could meet every requirement they set from here to eternity, but there will always be another hoop to jump through and the playing field will always be slanted to their benefit.

    You know the difference between an MEP and a catfish? One is a slimy, scum sucking, bottom dweller and the other is, well, a fish.

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