Sunday 15 September 2019

EU to discuss blacklist of tax havens after 'Paradise Papers' leaks

Bono: Anthony Devlin/PA Wire
Bono: Anthony Devlin/PA Wire

Francesco Guarascio

European Union finance ministers will on Tuesday discuss setting up a blacklist of worldwide tax havens, EU officials said.

The subject's inclusion on the monthly meeting's agenda came after the weekend publication of media reports citing the so-called "Paradise Papers", a trove of leaked financial documents mostly from Appleby, a prominent offshore law firm.

The documents were obtained by Germany's Sueddeutsche Zeitung newspaper and shared with the International Consortium of Investigative Journalists (ICIJ) and some media outlets. Reuters has not independently verified them. Appleby was not immediately available for comment.

According to the Paradise Papers, U2 frontman Bono was an investor in firm based in island nation Malta where foreign investors pay 5pc tax on profits. Bono invested in the Maltese company Nude Estates to buy a stake in the Ausra Mall in the town of Utena.

A spokesperson for the singer told the 'Guardian': "Bono was a passive, minority investor in Nude Estates Malta Ltd, a company that was legally registered in Malta until it was voluntarily wound up in 2015. Malta is a well-established holding company jurisdiction within the EU."

EU countries had planned for months to reach an agreement on a blacklist for tax havens by the end of this year. The new revelations prompted the discussion to be brought forward, EU officials said, but no final decision was expected on Tuesday.

Read more: U2 frontman Bono named in Paradise Papers leak

The EU has discussed several measures to crack down on tax avoidance in the past, including in the wake of the "Panama Papers", a release by the ICIJ last year which chronicled a shadowy world of offshore holdings and hidden wealth.

Measures previously discussed include an EU-wide list of tax havens meant to discourage the rerouting of profits made in the EU to tax-free or low-tax countries, like Panama or Bermuda.

At the moment, each EU country has its own list of jurisdictions that are seen as less cooperative on tax matters. Criteria to define a tax haven vary greatly among EU states and some of them include no jurisdictions in their national blacklists.

An EU blacklist is believed to carry more weight. Jurisdictions included in the list could be subject to sanctions if they did not cooperate.

There are no details yet of the type of sanctions to be discussed, although being on the blacklist in itself could discourage individuals and companies from putting money in those jurisdictions.

Some EU countries remain sceptical about the blacklist and are themselves under scrutiny for unfair tax competition.

Read more: Explainer: Everything you need to know about the Paradise Papers

Smaller EU states, like Luxembourg, Malta and Ireland, attract firms with lower corporate taxes. Some have been sanctioned for deals with multinationals that slashed their tax bills, reducing revenues in other EU states.

To win over their resistance, the proposed EU blacklist would apply only to non-EU countries. Also, states which charge no corporate taxes will not be automatically considered tax havens, under a preliminary deal reached by EU finance ministers last year.

On tax matters the EU can take decisions only with the unanimous backing of its 28 member states, unless extraordinary procedures are launched - an option never tested so far.

To reduce the appeal of tax havens, Brussels has also proposed the setting up of public registries that would show the real owners of companies, which are often hidden by frontmen in shell firms in offshore jurisdictions.

It has also proposed compulsory reporting by large multinational firms of profits made and taxes paid in each state where they operate, in a bid to show how much of their revenues are booked in low-tax countries.

EU states have been long discussing both proposals, but no deal has been reached yet. "EU governments such as Germany have been standing against the rising tide of financial transparency," said Carl Dolan, director of Transparency International EU.

British Prime Minister Theresa May nor her husband have any direct offshore investments, her spokesman said on Monday, after leaked documents revealed investments by wealthy individuals across the globe.

"Neither the prime minister or Mr May have direct offshore investments, their investments have been declared to the cabinet office and are held in a blind trust," he told reporters. "The nature of a blind trust is just that, this is a well established mechanism in protecting ministers in their handling of interests."

Separately, India formed a panel of government officials to investigate cases that figure in the so-called Paradise Papers.

Officials from government bodies and the central bank will carry out and monitor the investigation, the finance ministry said.

Additional reporting from Reuters


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