Members of the European Parliament passed a resolution on Thursday calling for reform of the EU list of uncooperative jurisdictions in tax matters.

Describing the current tax list as “confusing and ineffective”, parliamentarians said the EU’s “list of tax havens”, set up in 2017, has had a positive effect but failed to “live up to its full potential, [with] jurisdictions currently on the list covering less than 2% of worldwide tax revenue losses”.

The Cayman Islands was added to the list in February 2020 and removed again in October, following a raft of legislative reforms. These included new laws requiring companies in certain sectors to demonstrate sufficient economic substance, in the form of local offices and staff, and a new funds regime that, among other things, demands all funds be registered with the Cayman Islands Monetary Authority.

The chair of the parliament’s subcommittee on tax matters, Paul Tang, said in a press release on the passing of the resolution on 21 Jan., “While the list can be a good tool, member states forgot something when composing it: actual tax havens.”

He said, “The truth is, the list is not getting better, it’s getting worse. Guernsey, the Bahamas and now the Cayman Islands are only some of the well-known tax havens that member states have taken off the list.

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“In refusing to properly address tax avoidance, national governments are failing their citizens to the tune of over €140 billion. Especially in the current context, this is unacceptable.”

Tang said that is why the parliament strongly condemns the recent delisting of the Cayman Islands and calls for more transparency and stricter listing criteria.

At the same time, he noted that EU countries are responsible for 36% of tax havens.

EU member states should therefore also be screened for tax haven characteristics and included in the listing process.

The resolution, adopted in plenary with a majority of 587 votes in favour, 50 against and 46 abstentions, proposes changes that would make the process of listing or delisting a country more “transparent, consistent and impartial”, the EU parliament’s press release said.

The EU Parliament said the criterion for judging if a country’s tax system is fair or not needs to be widened to include more practices and not only preferential tax rates.

“The fact that the Cayman Islands has just been removed from the blacklist, while running a 0% tax rate policy, is proof enough of this,” the press release said.

New criteria should be added to ensure that more countries are considered tax havens. For instance, a jurisdiction’s 0% corporate tax rate should automatically put it on the blacklist.

New rules should also prevent countries from being removed from the tax list “too hastily”.

Being removed from the blacklist should not be the result of “token tweaks to that jurisdiction’s tax system”, MEPs said. They argued that the Cayman Islands and Bermuda were delisted after “very minimal” changes and “weak enforcement measures”.

MEPs questioned whether an informal body such as the Code of Conduct Group is able or suitable to update the blacklist.

The resolution calls for the listing process to be more transparent and to be formalised through a legally binding instrument by the end of 2021.

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