EU Mulls Options for Sanctions for Tax Haven Blacklist

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By Joe Kirwin

European Union member states are considering various options for sanctions on countries that end up on the EU’s tax haven blacklist, including a flexible approach that could lead to different EU countries imposing different measures against the same offending jurisdiction.

EU countries will also be able to maintain their own tax haven blacklist that includes different countries or jurisdictions as well as different sanctions, to those agreed at the EU level. The EU is due to finalize its tax haven blacklist by the end of 2017.

Based on documents seen by Bloomberg BNA, the 28 EU member countries are considering four kinds of sanctions: withholding taxes, new controlled foreign company rules, elimination of deductible costs such as royalties, and participation exemption limitations.

The document is the basis for the negotiations in the EU Code of Conduct Group for Business Taxation, which has been tasked with drawing up the EU tax haven blacklist and the sanctions.

“Identifying specific countermeasures will not mean agreement on their implementation in all cases,” the document states. “There may be arguments for applying different countermeasures for different jurisdictions or in different contexts or that member states should be allowed flexibility on which measures they should apply.”

Furthermore, the document states that the sanctions imposed by EU member countries should be “appropriate in the context of their national tax legislation. It has been suggested that the type of countermeasures to be applied vis-a-vis the various jurisdictions should differ according to the respective specifics of a situation (e.g. political and economic) and the issues that their assessment will raise.”

Three Options

To accommodate the various approaches, the options outlined in the document include: a flexible approach, rigid approach, or the toolbox approach.

The flexible approach would allow EU member countries to treat the list of sanctions as a “menu” from which to choose. “This option allows a maximum flexibility but can perhaps be considered as complicated,” the document states.

The rigid approach, according to the document “would require a list of countermeasures that is adaptable to the national systems of all member states and suitable for all listed jurisdictions.” In addition the rigid approach “will consequently have to be, at least initially, a very short list, due to differences in principles and specifics of existing national law as well as differences in national legislative processes.”

The third approach involves “the development of tool boxes of countermeasures that would be aimed at addressing specific issues.” An example outlined in the document referred to levies to be applied on outbound royalty payments made to jurisdictions or countries that end up on the EU blacklist. Further toolboxes could be developed eventually according to risks posed by listed jurisdictions or by categories of listed jurisdictions,” the document states. “The advantages of this option are that the countermeasures would be targeted. At the same time it allows flexibility for member states to develop new toolboxes according to the needs that may arise from time to time and to choose from the applicable toolboxes those countermeasures that best fit into their respective national tax system.”

Blacklist Screening

There are 92 countries being “screened” by EU member state officials to determine the blacklist. Among those under scrutiny are the U.S. and Switzerland, who are being assessed against a set of transparency and corporate tax criteria. The process is due to be concluded by the end of September.

Elo Madiste, an official with EU presidency holder Estonia, who works on tax issues, told Bloomberg BNA Aug. 9 that the different approaches and the respective sanctions eventually agreed by EU member states could depend on what countries end up on the blacklist.

“Some countermeasures might not be appropriate for some countries or jurisdictions,” Madiste said. She added that “it could be that the list of sanctions will not be finalized until after the list of countries is agreed.”

The document seen by Bloomberg BNA states that each member state “would of course still be free to apply countermeasures in addition to the EU list as well as maintain a broader national list of non-cooperative jurisdictions.”

The document also outlines ways in which EU legislation can be amended so that any country or jurisdiction on the blacklist would be targeted.

To contact the reporter on this story: Joe Kirwin in Brussels at

To contact the editor responsible for this story: Penny Sukhraj at

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