The EU Blacklist And The Pandora Paper

Tax Records reporter Sarah Paes discusses the potential impact of the recently released Pandora document on the EU tax haven blacklist.

This transcript has been edited for length and clarity.

David D. Stewart: Welcome to the podcast. I’m David Stewart, Editor-in-Chief of Today’s International Tax Revenue. This week: back to the blacklist.

On October 3, an international consortium of journalists published the first batch of leaked information-based articles called the Pandora Papers. These documents claim that the richest, most famous and most powerful tax havens in the world can be used to hide wealth and avoid paying taxes in your own country.

Similar publications have been seen before, such as the 2016 Panama Papers and the 2017 Paradise Papers, but the Pandora Papers have doubled the number of politicians and public figures involved in offshore activities and tax havens. There are a growing number of new voices calling for repression.

Against this backdrop, the EU has its own vision for a tax haven. The tax haven blacklist has come under increasing criticism and has called for reforms.

How did the country react to the Pandora document? Can you expect EU blacklist reform?

Here’s to talk more about this tax reporter Sarah Paes. Welcome to Sarah’s podcast.

Sarah Paes: Thank you for the invitation. I’m glad I’m back.

David D. Stewart: Let’s start at the beginning. What are we talking about when we talk about tax havens?

Sarah Paes: A tax haven is generally accepted as a legal system that provides foreign companies and individuals with little or no tax on bank deposits. There may also be a lack of beneficial ownership of a company or economic transparency or other special taxes.

David D. Stewart: Tax havens appear to have played an important role in the results of the Pandora Papers. How did the parties react to this finding?

Sarah Paes: Well that’s a pretty big reaction. His reaction was a kind of rage that was going on completely.

For example, extensive discussions took place in the European Parliament between Members of the European Parliament to legitimize their existence with respect to the need to address the gaps revealed in the Pandora document. …….

Outside the European Union, however, the Czech police and the Czech Republic have replied that they will primarily investigate all allegations in the Pandora documents. This includes his own prime minister, Andrei Babish.

As for other countries, the Australian tax authorities and the Pakistani government have announced that they will investigate the findings of the Pandora documents.

It was a huge worldwide reaction.

David D. Stewart: You recently looked at the EU blacklist. Can you start with an EU blacklist background? What is the purpose?

Sarah Paes: The European Union Tax Heaven Black List (known as the European Union Non-Cooperative Legislation List for Tax Purposes) is essentially a law or directive by which the European Union designates non-EU territories and encourages tax evasion. Soft law tool used for humiliation. The EU blacklist is maintained by the Code of Conduct Group, which works through the Council of the European Union. In essence, it is the body that approves and coordinates EU law.

David D. Stewart: How is the country blacklisted?

Sarah Paes: Well, it’s a little secret process. Codes of ethics are usually confidential. They usually do not present the minutes of their meeting until it has taken place. They mainly determine whether the inspected country meets the criteria in the Code Group’s blacklist.

David D. Stewart: Which countries are currently on the list?

Sarah Paes: The current list, adopted by the Council on October 5, includes American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu.

In this version of the list, Anguilla, Dominica, and the Seychelles have actually been removed and added to the gray list, which includes jurisdictions with better board oversight and progress review.

David D. Stewart: Reading some of the recent articles in the Pandora Papers has revealed that South Dakota is a tax haven. So no parts of the United States are on that list?

Sarah Paes: The short answer is no. If you want to split your hair, you can specify that the list includes three territories in the United States: Samoa, Guam, and the US Virgin Islands.

But you are right. South Dakota and Delaware, publicly known as tax havens, were not added to the list.

David D. Stewart: Now I understand that there are some inconsistencies with the countries on the list. Can you give us some information?

Sarah Pace: Of course. There is a lot of controversy regarding the countries on the list. Some criticism from lawmakers, tax observers and general observers is that the list is not well developed and not enough countries are named.

But others came out saying the list was unfair to certain types of non-EU countries, small island nations. People I spoke to about my article criticized the fact that mostly black countries often make it on this list.

Therefore, there is a lot of controversy, not only that the list has not progressed far enough, but also that the list may have gone too far in the wrong direction. Many of these blacklisted countries are low-income countries. Many of them do not have the resources to implement many of the changes that the EU wants.

Many of these changes are defined by OECD standards at the Global Forum. OECD countries are often wealthier countries. They are often the more closely related countries and members of the G7 and G20. As you can see, many of the countries on this list are not OECD countries. They are not members of a broad framework.

There is a very reasonable criticism from observers that this is unfair because these countries are measured by standards they have not set or set.

David D. Stewart: Let’s talk more about the criticism that this list is not doing everything possible to stop tax evasion and tax evasion. What do people say about it?

Sarah Pace: Of course. I think Turkey is probably the best example to sum up this statement that the blacklist is not that far-fetched and doesn’t cover the country as it should.

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