EU agrees screening process for tax havens, critics cry foul

European Union finance ministers agreed on Tuesday how to screen countries for a blacklist of tax havens across the world, officials said, and said applying zero-rate taxes was not necessarily a factor, prompting an outcry.

The bloc committed in May to agree on a common list of tax offenders by the end of next year, after leaked documents – the so-called Panama Papers – that showed how some multinationals and individuals avoided paying tax, caused worldwide outrage.

Tuesday’s agreement on defining tax havens cited zero-rate tax only as “an indicator of possible unfair practices”, Italy’s Finance Minister Pier Carlo Padoan said after the meeting.

That prompted German leftist EU lawmaker Fabio de Masi to say the plans were “akin to a whitewash”.

“It is grotesque that some EU member states regard the zero tax criterion as being too strict. Even the Bahamas are going to be exempt from this,” he said in a note.

All 28 EU countries have a right of veto on tax issues and this has scuppered past attempts at a common blacklist.

Acknowledging divisions among EU member states and the opposition to stricter tax measures from those which apply very low tax rates, Slovak Finance Minister Peter Kazimir said: “This can be the veto area for certain countries.”

The European Commission published an initial list in September, which named 81 countries and jurisdictions that have a higher chance of facilitating tax avoidance and may be subject to further screening and even sanctions.

Critics fear the final list may be much shorter and exclude well-known tax havens.

Human rights group Oxfam called for the blacklist to include Switzerland and some states within the European Union that it identified as corporate tax havens, including “the Netherlands, Belgium, Cyprus and Luxembourg”.

“Tax havens are helping big business cheat countries and their citizens out of billions of dollars in tax every year. By starving countries of money needed for education, healthcare and job creation tax havens are exacerbating poverty and inequality across the world,” it said in a statement.

In a separate decision, ministers also agreed on Tuesday on new rules to allow tax authorities to access information on the beneficial ownership of companies and trusts from 2018, in a bid to increase transparency and reduce tax avoidance.

The European Parliament will have to approve the new rules before they can become law.