The European Union will hold a discussion today on plans for blacklisting tax havens after the Paradise Papers leaks over the weekend.
As part of the union’s finance ministers’ monthly meeting, discussions will be held on ways to discourage profits being held in tax-free or low-tax countries. No final decision is expected today, however.
The EU was aiming to reach an agreement to blacklist tax havens by the end of the year, however, the topic has been brought forward.
The vice president of the European Commission, the executive arm of the EU, Valdis Dombrovskis, told reporters yesterday the revelations had, “put renewed emphasis on the work the European Commission is doing to fight tax avoidance.”
What are the Paradise Papers?
Similar to the Panama Papers, offshore law firm Appleby suffered a security breach last year when 13.4m files were stolen regarding the dealings of its client base.
The documents were given to the German newspaper Sueddeutsche Zeitung by an unnamed source, which shared them with the International Consortium of Investigative Journalists (ICIJ). The revelations were published over the weekend, detailing how individuals such as U2 frontman Bono and F1 driver Lewis Hamilton used offshore accounts to avoid paying tax.
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What could a blacklist by the EU look like?
The European Commission identified 81 countries and jurisdictions last year that had a high chance of facilitating tax avoidance. The idea proposed was that placing these countries on a blacklist could lead to sanctions imposed if there is no cooperation.
As well, it is thought the blacklisting would prevent individuals and companies stashing their money in this way.
Other proposals include setting up public registries that detail the real owners of companies in these jurisdictions, which are often hidden by shell firms.
It won’t be easy to pull off. The EU has been discussing ways to crack down on tax havens following last year’s Panama Papers. A journalist who led the investigation into the Mossack Fonseca leaks, Daphne Caruana Galizia, was killed a few weeks ago in a car bomb near her home in Malta.
However, there may be a renewed impetus following the Paradise Papers.