Questions and Answers on the EU list of non-cooperative tax jurisdictions

Why did the EU not exclude developing countries from the EU listing process?

The specific situation of developing countries was taken fully into account throughout the EU listing process. The Commission excluded 48 Least Developed Countries from the pre-assessment, in recognition of the particular constraints they face. In addition, developing countries without financial centres have been given an extra year to meet the expected standards, when deficiencies were found in their tax systems with respect to transparency and BEPS implementation.

The Commission is very sensitive to the challenges that developing countries face in the area of taxation. The External Strategy has a whole section on supporting developing countries in fighting tax abuse and collecting domestic revenues, which builds on the Commission's “Collect More, Spend Better” strategy. This delivers on the EU's commitments under the Addis Tax Initiative, such as increased support to low income countries in improving their revenue raising capacities. The Commission and Member States have also started to examine possible effects of EU and national tax policies on developing countries, to prevent negative spill-overs and ensure greater policy coherence.

What sanctions will apply to listed countries?

The EU list should have a real impact on the countries concerned, thanks to new EU legislative measures.

First, following Commission proposals the EU list is now linked to EU funding in the context of the European Fund for Sustainable Development (EFSD), the European Fund for Strategic Investment (EFSI) and the External Lending Mandate (ELM). Funds from these instruments cannot be channelled through entities in listed countries. Only direct investment in these countries (i.e. funding for projects on the ground) will be allowed, to preserve development and sustainability objectives.

Second, the Commission has made reference to the list in other relevant legislative proposals. For example, the public Country-by-Country reporting proposal includes stricter reporting requirements for multinationals with activities in listed jurisdictions. In the proposed transparency requirements for intermediaries, a tax scheme routed through an EU listed country will be automatically reportable to tax authorities. The Commission is also examining legislation in other policy areas, to see where further consequences for listed countries can be introduced.

In addition to the EU provisions, the Commission encouraged Member States to agree on coordinated sanctions to apply at national level against the listed jurisdictions. First steps have been taken in this direction. Member States have agreed on a set of countermeasures which they can choose to apply against the listed countries. These include measures such as increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions. The Commission will support Member States' work to develop a more binding and definitive approach to sanctions for the EU list in 2018.

Will the list be updated?

Yes. The list will be updated at least once a year. This update will be based on the continuous monitoring of listed jurisdictions, as well as those that have made commitments to improve their tax systems. Depending on developments, Member States may also decide to screen even more countries in 2018. An interim report will be prepared by mid-2018 to assess progress made.

From June 2019, more stringent transparency criteria come into effect, which will require a re-assessment of all jurisdictions to ensure that they are in line. The EU listing criteria will also be updated in the future, to reflect new elements that Member States agreed upon, such as transparency on beneficial ownership, as well as possible evolutions at international level.

How can a country be de-listed by the EU?

A country will be removed from the list once it has addressed the issues of concern for the EU and has brought its tax system fully into line with the required good governance criteria. The Code of Conduct will be responsible for updating the EU list, and recommending countries for de-listing to the Council.

Is the EU list in line with the international agenda for tax good governance?

Yes, the EU list firmly supports the international tax good governance agenda. The EU listing criteria reflect internationally agreed standards and countries were encouraged to meet these standards to avoid being listed. The EU also took on board OECD assessments of countries' transparency standards and tax regimes, as part of the screening process. The Commission and Member States were in close and regular contact with the OECD throughout the listing process, to ensure that EU and international work in this area remained complementary and mutually reinforcing.

How is the EU list different from the list published by the OECD in July?

The OECD list focussed on countries that failed to meet international transparency standards, as requested by the G20. The EU list is based on a wider set of good governance criteria. In addition to transparency, it also covers fair taxation, adherence to BEPS standards, and the level of taxation, where this might encourage artificial structures and arrangements. As such, there was a wider scope to the EU listing process. This is in line with the broad spectrum of tax good governance standards that EU Member States themselves adhere to.

How does the new EU list compare to the "pan-EU list" published in 2015?

The new EU list is a fully coordinated EU project. It was conceived, developed and managed at EU level. The criteria and process were agreed by EU Finance Ministers at the ECOFIN Council, and Member States worked together to screen selected countries and to decide which ones to list. The final EU list was unanimously endorsed by Member States in Council.

The "pan-EU" list was simply a compilation of Member States' individual lists. The Commission published this consolidated version of national lists in June 2015, as a first step towards a more coordinated EU approach. The "pan-EU" list highlighted how diverse Member States' lists were, and the confusion this created for businesses and international partners. Many countries welcomed the idea of a single EU listing process, which would be clearer and easier to work with than a patchwork of different lists.

What is the difference between this list of non-cooperative tax jurisdictions and the EU anti-money laundering list?

The anti-money laundering (AML) list is focussed on countries with poor anti-money laundering and counter-terrorist financing regimes. It reflects the Financial Action Task Force (FATF) approach to dealing with countries that have not implemented internationally agreed anti-money laundering standards. Banks must apply higher due diligence controls to financial flows towards these listed countries.

The EU tax list targets external risks posed by countries that refuse to respect tax good governance standards. It has different objectives, different criteria, a different compilation process and different consequences to the AML list. Nonetheless, the two lists will complement each other in ensuring double protection for the Single Market against external good governance risks.

MEMO/17/5122