More than two dozen countries face being named on a European tax-haven blacklist as the EU moves to crack down on aggressive avoidance.
The draft list, compiled by the European Council's Code of Conduct (COC) group, comprised of tax experts from each EU member state, includes 25 countries. However, at least four - Panama, Samoa, Guam and the Marshall Islands - are likely to be removed after they made last-minute promises to reform.
Others may follow as the group considers any further pledges received by Monday evening. Countries hit by the summer’s big hurricanes in the Atlantic and Caribbean have until February to provide a response.
But Brussels is keen to ensure national political interests do not influence EU finance ministers when they finalise the list on Tuesday.
EU member states still need to decide when the list will be updated, how they will track progress on promised reforms and what sanctions will be imposed on blacklisted countries.
Officials say countries have been scrambling to promise reforms to avoid being included on the list. In addition to reputational damage, existing and planned EU legislation has practical implications for blacklisted jurisdictions, such as imposing additional financial disclosure requirements on multinationals doing business with them.
To stay off the list, countries must meet three criteria or promise to reform their systems to comply. Nations must have fair tax rules, which the EU defines as not offering preferential measures or arrangements that enable companies to move profits to avoid levies. They must also meet transparency standards and implement anti profit-shifting measures set by the Organisation for Economic Co-operation and Development.
The European Commission has put pressure on the council to ensure the list is comprehensive and that details of reform pledges made by those left off are also made public to ensure transparency.
"The list...will be the member states' responsibility and it will be their credibility that is at stake," said Pierre Moscovici, European commissioner for tax, last week. "A short blacklist would only be acceptable if accompanied by a substantial and public record of the commitments obtained."
International authorities have previously published similar blacklists, but most have struggled for credibility.
The OECD's tax haven list published in June 2016 contained only one country - Trinidad & Tobago.
Alex Cobham of Tax Justice Network, a campaign group, said at the time that the document marked a disheartening return to "the [OECD'S]old pattern of creating 'tax haven' blacklists on the basis of criteria that are so weak as to be near enough meaningless, and then declaring success when the list is empty".
Applying the council's criteria to publicly available information, Oxfam, the charity, said such a list should feature 35 countries - including EU members Ireland, Luxembourg, the Netherlands and Malta. The COC process has not considered EU members in its analysis.
A commission attempt in 2015 to create an EU blacklist based on those compiled by individual member states was subject to political interference, as countries seeking to avoid inclusion lobbied national governments to drop them from their original lists.
Blacklisting countries has always been "a political process", Elena Gaita of Transparency International, the anti-corruption watchdog, said. The COC group was "the most secretive council group - the council's black box", and having it run the process risked creating a list that was "far from objective and comprehensive", she said.
However, four people familiar with the COC analysis said it had been systematic and free of political intervention.
The COC group warned 53 jurisdictions in the autumn that they risked being listed. Initial screening identified 92, who were asked in February to provide additional information. Only Namibia did not engage with the process.
To be credible, the council’s list must be “a meaningful, objective, transparent list backed by a robust monitoring process, as well as by dissuasive countermeasures to maintain pressure on third countries”, Mr Moscovici said.
– Copyright The Financial Times Limited 2017
