Jersey and the Isle of Man, along with the Cayman Islands, are among UK overseas territories which have escaped being placed on the new EU blacklist of tax havens, just agreed in Brussels.
Those islands, plus Bermuda, instead appear on a list of those who have committed by the end of 2018 to reform their tax structures. This “grey” list covers 47 countries which do not meet the EU tax standards but have pledged to change their rules to improve their tax arrangements.
The blacklist itself contains 17 jurisdictions, including Barbados, Grenada, Trinidad and Tobago and, controversially, the United Arab Emirates and South Korea. The other names included are American Samoa, Bahrain,Guam, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa and Tunisia.
French finance minister Bruno Le Maire said: “This is not just a one-off process. We will regularly review and update the list in the years to come. Our aim is to ensure that good tax governance becomes the new norm.”
Potential sanctions that could be enforced on members of the list are expected to be discussed early next year. EU members have been left to decide what action to take against the offenders. The imposition of a withholding tax on transactions to tax havens as well as other financial sanctions has been ruled out.
Some states, such as Luxembourg and Malta, opposed stricter sanctions.
The new list comes less than a month after the publication of the Paradise Papers, a global leak containing information about individuals and companies holding offshore finances.
EU finance commissioner Pierre Moscovici had called for countries to “rapidly” adopt a European tax haven list in light of the Panama Papers revelations, as well as arguing that such a list should be enforced with “credible and meaningful” sanctions.
To measure whether a country is a "non-cooperative jurisdiction" the EU index measures the transparency of its tax regime, tax rates and whether the tax system encourages multinationals to unfairly shift profits to low tax regimes to avoid higher duties in other states. In particular these include tax systems that offer incentives such as zero corporate tax to foreign companies.
Estimates suggest that about $750 billion is lost to aggressive avoidance annually.