It is now for EU Member States to choose which countries should be screened more fully over the next months so as to accurately pinpoint the countries which do not play by the rules when it comes to taxation.
In January 2016, the Commission launched a three-step process for establishing the common EU list as part of its broader agenda to curb tax evasion and avoidance. A common EU list of non-cooperative jurisdictions will carry much more weight than the current patchwork of national lists when dealing with non-EU countries that refuse to comply with international tax good governance standards. An EU list will also prevent aggressive tax planners from abusing mismatches between the different national systems.
The aim is to publish the definitive list of non-cooperative jurisdictions by the end of 2017. Member States have already given their backing to this approach, which is also strongly supported by the European Parliament.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said: "The EU takes its international tax good governance commitments seriously. It is reasonable for us to expect the same from our international partners. We want to have fair and open discussions with our partners on tax issues that concern us all in the global community. The EU list will be our tool to deal with third countries that refuse to play fair."
How the scoreboard was devised
The aim of the Commission’s scoreboard is to help Member States to determine which countries the EU should start a dialogue with regarding tax good governance issues. It has been devised to get the ball rolling and help inform Member States’ choices when deciding which countries they should begin screening.
All non-EU countries and tax jurisdictions in the world were analysed to determine their risk of facilitating tax avoidance. This pre-assessment was based on a wide range of neutral and objective indicators, including economic data, financial activity, institutional and legal structures and basic tax good governance standards.
As a first step, the scoreboard presents factual information on every country under three neutral indicators: economic ties to the EU, financial activity and stability factors. The jurisdictions that feature strongly in these three categories are then set against risk indicators, such as their level of transparency or potential use of preferential tax regimes.
The pre-assessment does not represent any judgement of third countries, nor is it a preliminary EU list. Countries can feature high in the scoreboard's indicators for a number of reasons, even when they pose no threat to Member States' tax bases. The intention is to help Member States to narrow down their focus when deciding which countries to screen in more detail from a tax good governance perspective, which is the next step in the EU listing process. The EU will work closely with the OECD during the listing process, and will take into account the OECD's assessment of jurisdictions' transparency standards.
The pre-assessment was presented to Member State experts in the Council Code of Conduct Group on Business Taxation on 14 September. Based on the results, the Code of Conduct Group will decide on the relevant jurisdictions to screen, which should be endorsed by finance ministers before the end of the year. The screening of the selected countries should begin next January, with a view to having a first EU list of non-cooperative tax jurisdictions before the end of 2017.
The new EU listing process is part of the EU's campaign to clamp down on tax evasion and avoidance and promote fairer taxation, within the EU and globally. It was proposed by the Commission in the External Strategy for Effective Taxation in January 2016, and endorsed by EU Finance Ministers in May. The European Parliament has also repeatedly expressed support for an EU listing process.
The External Strategy sets out a clear, fair and objective EU process for listing based on three steps:
1. Scoreboard: The Commission produces a neutral scoreboard of indicators, to help determine the potential risk level of each third country's tax system in facilitating tax avoidance. The Commission presents the findings of the scoreboard to Member State experts in the Code of Conduct Group in Council.
2: Screening: On the basis of the scoreboard results, Member States decide which third countries should be formally screened by the EU. The screening of third countries' tax good governance standards will be carried out by the Commission and the Code of Conduct Group. There will be a dialogue process with the countries in question, to allow them to react to any concerns raised or discuss deeper cooperation with the EU on tax matters.
3: Listing: Once the screening process is complete, third countries that refused to cooperate or engage with the EU regarding tax good governance concerns should be put on the EU list.
The common EU list is intended as a "last resort" option. It will be a tool to deal with third countries that refuse to respect tax good governance principles, when all other attempts to engage with these countries have failed.
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