There are currently 12 countries on the European Union’s “tax haven blacklist” – half of which are in the Pacific (American Samoa, Fiji, Guam, Palau, Samoa and Vanuatu). Panama is the largest country (population 4.2 million).
All of the remaining 11 have populations less than one million. All these countries have been blacklisted ostensibly because they facilitate international tax avoidance and/or financial and tax secrecy.
The direct consequences of blacklisting are various sanctions by EU member countries, including applying withholding taxes at a higher rate on payments received in blacklisted jurisdictions.
This serves as a disincentive for EU companies to invest in blacklisted countries. Blacklisting also carries reputational risks and may affect the ability of these countries to access funds from international development lenders.
Smaller countries on the blacklist have often complained it is discriminatory because the real tax avoidance facilitators are in the EU’s backyard. The much-discussed tax strategies of major technology companies would not be possible without favorable tax policies in the Netherlands, Ireland and Luxembourg.
It should come as no surprise to many in the Pacific that Tax Justice Network (TJN) has found that countries blacklisted by the EU cause less than 2 percent of global tax losses, while EU member states cause 36 percent. TJN estimates that in total countries are losing over $427 billion in tax each year to international corporate tax abuse and private tax evasion.