BRUSSELS: European Union finance ministers adopted a blacklist of 17 jurisdictions deemed as tax havens on Tuesday, in an unprecedented step to counter worldwide tax avoidance, although they did not agree on financial levies for the listed countries.

To discourage the use of shell structures abroad - which in many cases are legal but may hide illicit activities - the EU in February began screening 92 jurisdictions seen as possible tax havens. The move came in the wake of numerous disclosures of offshore tax avoidance schemes used by companies and wealthy individuals.

EU finance ministers approved a common blacklist on Tuesday made up of American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates (UAE).

South Korea, which has a comprehensive free trade deal with the EU, was listed because it has “harmful preferential tax regimes,” while the UAE does not apply minimum global standards against tax avoidance, the EU said in a document.

“This list represents substantial progress. Its very existence is an important step forward. But because it is the first EU list, it remains an insufficient response to the scale of tax evasion worldwide,” EU tax commissioner Pierre Moscovici said after the meeting.

A second public “grey” list, or “watchlist”, of 47 jurisdictions that have committed to changing their tax rules to abide by EU standards on transparency and cooperation was also adopted. It includes Switzerland, Turkey and Hong Kong.

Morocco and Cape Verde were moved from the blacklist to the watchlist at a late hour after making last-minute commitments to tax reforms, officials said. The lists will be updated regularly.

Blacklisted countries may no longer be used by EU institutions for international financial operations, and transactions involving them could be subject to closer scrutiny.

These penalties may have little effect in persuading the wealthiest tax havens to change course, however.

“Stronger countermeasures would have been preferable,” EU Commission Vice-President Valdis Dombrovskis told a news conference after the meeting. Some states, like Luxembourg and Malta, opposed stricter sanctions, officials said.

The ministers ruled out imposing a common withholding tax on transactions to tax havens as well as other coordinated financial sanctions, but could do so at national level. Britain had shown reticence over the process, EU officials said. No British overseas territories such as the Cayman Islands or Bermuda, nor the Channel Islands were put on the blacklist, in what was seen as a diplomatic victory for London.

Published in Dawn, December 6th, 2017