ON JUNE 17 the European Commission published a list of 30 countries, including Barbados, that it describes as non-cooperative jurisdictions on tax matters. The list is designed to tar and feather these countries, to reduce their access to international development funds and so pressure them into abandoning their international financial centres.
It is an act of gross discriminatory bullying that will become the modern definition of colonialism.
The Netherlands, Ireland and Luxembourg are under investigation by the European Union (EU) competition authorities for facilitating aggressive tax avoidance that formed the basis of their own international financial centres. These investigations followed the leaking of documents to journalists that showed Luxembourg had entered into 548 private tax rulings between 2009 and 2013 to allow 340 of the largest companies in the world to avoid paying taxes in EU countries.
The companies included Pepsi, Amazon, Walt Disney, Procter & Gamble, Ikea, Heinz, Deutsche Bank and J.P. Morgan.
Yet Luxembourg, Ireland and the Netherlands are not on the EU’s list. Instead of tarring and feathering the countries with the greatest source of tax losses to the EU, they have chosen to be judge and jury over 30 small countries, powerless to defend themselves against wrongful accusations.
The mix of countries that have tax minimising regimes is not differentiated by large or small, rich or poor, black or white. But the EU list is.
This kind of discriminatory bullying will serve to undermine international efforts to establish a level playing field on tax matters. Why should countries sign the Organisation for Economic Cooperation and Development Multilateral Convention on Mutual Administrative Assistance In Tax Matters, as many of the targeted countries have, if they are still barred without any due process based around evidence, non-discrimination and other aspects of natural justice it also fosters the very tax avoidance the EU claims to be trying to stop?
Recall that the activities of Luxembourg, Ireland and Netherlands were common knowledge for decades but the EU was only compelled to investigate after the public outcry that followed press reports. Blatant discrimination doesn’t reduce tax avoidance; it shifts it. When Apple, Google, and Starbucks want to avoid EU tax, they know where to go.
The EU’s actions would make corrupt individuals blush: be thick in the middle of hundreds of deals avoiding billions of dollars in taxes, then accuse Niue, a Pacific nation state with a GDP of $10 million, as a major threat to the tax receipts of European governments. President of the EU Commission, Jean Claude Juncker was prime minister of Luxembourg when the tax deals were being developed. He has adopted the Warner defence: “I have nothing to reproach myself more than others would have to reproach themselves.”
The EU is saying that Swiss activities are far less a threat to EU tax revenues than those that take place in Barbados, Niue, Montserrat, Liberia, Vanatu, St Vincent, St Kitts and the Cook Islands.
Do you know of a more intellectually bankrupt idea?
Professor Avinash Persaud is non-resident senior fellow of the Peterson Institute for International Economics in Washington, emeritus professor of Gresham College in the United Kingdom and chairman of Intelligence Capital Limited.
