The EU has created a “tax haven blacklist”. It aims to deter extremely wealthy individuals and companies from legally avoiding tax. There are multiple ways that this can be done. But the main way is moving money to countries that have looser tax laws. Since the financial crisis and the ongoing policy of austerity in many Western countries. Governments exclaim that in order to “balance the books” tough decisions need to be made. The policy of austerity has seen billions cut from welfare and public services. All of this in the name of clearing the national debt. However, this policy is causing controversy as more information comes to light. Tax avoidance is keeping billions from governments across the world. Meaning that much of the austerity cuts that took place would be minimised if people and companies paid the correct tax.
“Name and shame”
The EU has decided that one way to tackle this is to create a blacklist. This consequences of being on the blacklist are mainly trade sanctions so far. Additionally, the ethical backlash of the “name and shame” mentality. The first 17 countries on this blacklist are American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, the Marshall Islands, Mongolia, Namibia, Palau, Panama, St Lucia, Samoa, Trinidad & Tobago, Tunisia and the UAE… They will feel the consequences first. Then there are about 50 nations on the ‘greylist’ who have been flagged as tax havens but have been given time to comply with EU standards and regulations.
There are two main arguments to this development. On one hand many people say that this blacklist does not go far enough and accuse it of being “whitewashed”. Majority of the companies, lawyers and accountants who facilitate the tax avoidance are in the western nations. These include UK, America, Switzerland etc… Furthermore, the consequences of being on blacklist are potential sanctions and restrictions. This which would affect the already challenged governments and its citizens rather than the big cooperation’s and individuals who can simply move their money from nation to another. The biggest criticism is that this blacklist does not go far enough to tackling the root of the problem.
On the other hand, there are people who are not so much huge advocates of the blacklist but are more optimistic about its future. Some say that this is a good first step in tackling tax avoidance and that with time it will become a more comprehensive. Some suggest alternatives that could be used instead of sanctions and removing funding to reach the desired goal. Such as financial grants and investments as ways to strengthen institutions and not have to rely on being a tax haven to gain some revenue. Aside from this, there are more critiques than support for this new blacklist.
Overall it is clear that something needs to be done about tax havens and tax avoidance. However, countries in the Global South are not the cause of tax havens and should not be treated as such. If no action is taken against the lawyers, accountancy firms and large corporations, it is unlikely that this blacklist will be effective.