Tax Law · EN
Panama: a Tax Haven According to the EU.
HISTORICAL ARCHIVE (2018): the European Union's first list of non-cooperative tax jurisdictions included Panama in the wake of the Paradise Papers scandal. The transparency, exchange-of-information and fair-competition criteria the EU applied to draw up that list, and the sanctions it envisaged for the jurisdictions included.
The Economic and Financial Affairs Council of the European Union included Panama in its first list of tax havens, published in 2017. The Union considered these States to be "non-cooperative jurisdictions in tax matters," a finding it used to justify the inclusion of third countries on this type of list.
The list saw the light of day shortly after the outbreak of the latest tax-evasion scandal, known as the Paradise Papers. In addition, there were 47 jurisdictions included in the so-called grey zone.
While there are States within the EU that could be included on this list, the same does not happen with them because, being part of that Council, they put up fierce resistance to the criteria used to draw up the document.
Along the same lines, special consideration was given to the Caribbean countries that suffered the onslaught of that year's Atlantic hurricane season.
In a press note published on the Union's website, it states:
This unprecedented exercise will raise the levels of good tax governance globally and will help prevent large-scale tax abuses such as those exposed in recent scandals of the Paradise Papers type.
Sanctions
Beyond the ineffective embarrassment that being included on this list may produce, the Member States are considering the possibility of applying certain sanctions to the non-cooperative nations, such as the blocking of funding by the European Union or the World Bank — it should be recalled that these countries are recipients of international aid — and, in addition, controls would be increased for those operating there.
Countries included in the European Union's new list of tax havens, together with a comparative table of their links to the most notorious scandals.
This list is not static; it will continue to be developed throughout 2018 (Tax Havens):
- As a first step, a letter will be sent to all listed jurisdictions explaining the decision to place them on the list and explaining what requirements they must meet in order to be removed from it.
- The Commission and the Member States will continue to closely monitor all jurisdictions, to make sure the requirements have been met and to determine whether there is any other jurisdiction that should be added to the list in the future.
- A first progress report will be published in mid-2018. The EU will update the list at least once a year.
The first list of non-cooperative jurisdictions in tax matters issued by the European Union was agreed by the Union's finance ministers at their meeting in Brussels.
As early as January 28, 2016, the European Commission had issued a communication (External Strategy for Effective Taxation, 28/01/2016) in which it stated, among other things (Tax Havens):
"Some companies take advantage of legal loopholes and mismatches between the defensive measures of the Member States to shift their profits out of the single market, free of all taxation. In addition, companies face legal uncertainty and unnecessary administrative burdens arising from the existence of twenty-eight different national policies for assessing and treating the tax systems of third countries.
The diversity of Member States' solutions sends contradictory messages to international partners about the EU's good tax-governance expectations and raises doubts about the circumstances that trigger the defense mechanisms.
It is therefore essential that the EU adopt a coordinated external strategy of good tax governance to strengthen the collective success of the Member States in the fight against tax avoidance, ensure tax effectiveness and create a clear and stable environment for businesses in the single market."
Good tax-governance criteria
In 2012, the Commission published a Recommendation to the Parliament and the Council on measures intended to encourage third countries to apply minimum standards of good governance in tax matters. It recommended that the Member States use the three criteria of transparency, exchange of information and fair tax competition when assessing the tax regimes of third countries and that, where necessary, they apply common "countermeasures."
That Recommendation was endorsed by the EU finance ministers at the ECOFIN Council of May 2013 and was subjected to extensive debate among Member State experts and the members of the Platform for Tax Good Governance.
| Tax Transparency | Within the EU, Member States have applied the standard of automatic exchange of information on financial accounts for tax purposes since 2017. In addition, the EU has concluded automatic exchange-of-information agreements with Switzerland, Liechtenstein and San Marino, and is finalising similar agreements with Andorra and Monaco. These countries made a special effort to conclude the negotiations and sign ambitious transparency agreements within very short deadlines. Consequently, the EU criteria for all third countries in matters of transparency and exchange of information must include, as a minimum, the new global standard of automatic exchange of information. |
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| Exchange of Information | Country-by-country reporting requirements have been established for the banking and financial sector, under the Capital Requirements Directive (CRD IV), and for the extractive and logging industries, under the Accounting Directive. |
| Fair Competition | The Commission recommended that Member States assess the tax systems of third countries in accordance with the Code of Conduct for Business Taxation, the instrument available to the EU itself for dealing with harmful tax regimes. |
The Economic and Financial Affairs Council (ECOFIN) is composed of the economy and finance ministers of the 28 members of the Union's Council. It is responsible for the European group's budget, economic matters, and economic relations with third countries.
The Financial Action Task Force (FATF) is an intergovernmental body created in 1989 to set standards and promote the effective implementation of measures to combat money laundering, terrorist financing and other related threats to the international financial system.
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