EU Drafting New Blacklist

By Global Tax Weekly

The OECD doesn’t have a blacklist of non-cooperative jurisdictions right now. At least, if there is a sheet of paper filed somewhere in its Paris headquarters under “blacklist,” there are no jurisdictions on it. However, blacklists, it seems, are all around us. Individual countries, particularly in the European Union, maintain them, and the EU is at present attempting to compile a definitive blacklist of jurisdictions that are supposedly soft on tax and financial crime, albeit with some difficulty.

The fact that the EU is struggling to complete what should be, on the surface, an easy task – after all, it’s only a list of countries and territories – hints at the flaws inherent in a blacklist. The criteria used to determine a “bad” jurisdiction in tax and legal terms is subjective, and can vary from one country to another. One state’s bad egg is another’s good neighbor.

Politics also plays a key part. After all, it’s a near certainty that the United States will not appear on the EU blacklist – or the majority of other countries’ lists of bad guys for that matter – despite the fact that a Delaware corporation is as ironclad confidentiality-wise as an international business company in any tax haven you care to mention. And the same goes for many advanced economies that fail to practice what they preach on transparency.

What’s more, being named on a blacklist is no trifling matter for the jurisdictions concerned, or for foreign investors. For it can mean that transactions between the source country and the blacklisted country are restricted, or at worse, barred completely.

Blacklists, therefore, can be dangerous things. Maybe we should all be on a blacklist unless we can show we are well beyond reproach. The proverb about people in glass houses springs to mind…

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