European Union finance ministers adopted a blacklist of 17 jurisdictions deemed as tax havens on Tuesday, in an unprecedented step to counter worldwide tax avoidance, although they did not agree on financial levies for the listed countries.
To discourage the use of shell structures abroad - which in many cases are legal but may hide illicit activities - the EU in February began screening 92 jurisdictions seen as possible tax havens. The move came in the wake of numerous disclosures of offshore tax avoidance schemes used by companies and wealthy individuals.
EU finance ministers approved a common blacklist on Tuesday made up of American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.
"This list represents substantial progress. Its very existence is an important step forward. But because it is the first EU list, it remains an insufficient response to the scale of tax evasion worldwide," EU tax commissioner Pierre Moscovici said after the meeting.
A second public "grey" list, or "watchlist", of 47 jurisdictions that have committed to changing their tax rules to abide by EU standards on transparency and cooperation was also adopted. It includes Switzerland, Turkey and Hong Kong.
Morocco and Cape Verde were moved from the blacklist to the watchlist at a late hour after making last-minute commitments to tax reforms, officials said.
The lists will be updated regularly.
Blacklisted countries may no longer be used by EU institutions for international financial operations, and transactions involving them could be subject to closer scrutiny.
These penalties may have little effect in persuading the wealthiest tax havens to change course, however.
"Stronger countermeasures would have been preferable," EU Commission Vice-President Valdis Dombrovskis told a news conference after the meeting. Some states, like Luxembourg and Malta, opposed stricter sanctions, officials said.
The ministers ruled out imposing a withholding tax on transactions to tax havens as well as other financial sanctions.
Britain had shown reticence over the process, EU officials said. No British overseas territories such as the Cayman Islands or Bermuda, nor the Channel Islands were put on the blacklist, in what was seen as a diplomatic victory for London. They were put on the grey list instead.
Bermuda was at the centre of the most recent large disclosure of offshore financial documents, the Paradise Papers.
Eight Caribbean islands recently hit by hurricanes, including Anguilla and the Bahamas, were given until March to comply with EU standards before a decision is made on their listing.
EU states have not been screened and will not be on the list. The commission said none of the 28 members of the bloc can be classified as a tax haven, as all have agreed to respect EU tax standards.
But anti-poverty and fair tax groups said that if screened against EU criteria, countries like Luxembourg, Malta, the Netherlands and Ireland would all be on the EU list.
"The list cannot just comprise third countries but must also contain EU jurisdictions," the German conservative vice-chair of the European Parliament`s economic affairs committee, Markus Ferber, said in a statement on Tuesday.TECH FIRMS, U.S. REFORM
EU ministers also adopted a common position on taxation of tech corporations like Amazon or Facebook, which have been accused of paying too little tax in the EU. Such firms reroute the booking of their profits to low-tax nations where they have headquarters, like Luxembourg and Ireland.
The common text, watered down after pressure from some countries, calls for considering a new corporate taxation system based on the "virtual" presence of a firm in a country. The system would allow for the taxation of online business where the companies have activities and not only where they are headquartered.
The commission is expected to present proposals in the coming months, which could include "temporary measures" like targeted taxes on transactions carried out by digital firms.
Temporary levies could be adopted before a global deal on taxing the digital economy. The EU would prefer tax reforms were coordinated with international partners.
The ministers also agreed on new rules forcing online shopping firms such as Amazon, Google and Alibaba to collect the value-added tax (VAT) on sales on their platforms, to counter possible tax fraud by firms using such platforms.
At the meeting, finance ministers also assessed the impact of reform in the United States that will slash corporate tax from 35 percent to 20 percent.
Ministers planned to discuss "whether all provisions are in line with WTO (World Trade Organisation) rules," the commission`s vice-president Valdis Dombrovskis told reporters.
The topic was added to the meeting`s agenda after the U.S. Senate approved the tax reform on Saturday.
Dombrovskis said EU ministers wanted to look into the "potential effect on trade" of the planned overhaul, echoing concerns raised on Monday by EU officials.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.