On 14 September 2016, the Commission completed the first step of the new EU listing process: a Scoreboard of all third country jurisdictions for tax purposes. 160 third country jurisdictions were examined against objective economic, financial, stability and tax good governance indicators. The findings of the Scoreboard are not sufficient to draw conclusions on whether a third country jurisdiction should be selected for screening or put on the common EU list; it is a pre-analysis exercise – “an objective and robust data source”.
In the External Strategy for Effective Taxation, the Commission set out a new EU listing process to deal with jurisdictions that refuse to comply with tax good governance standards. Member States endorsed this process at the May 2016 ECOFIN and called for a first EU list to be ready in 2017.
This list should be established based on a three-step process:
- Scoreboard of indicators: to help determine the potential risk level of each country’s tax system in facilitating tax avoidance.
- Screening: Member States decide which third countries should be formally screened by the EU. This will involve a dialogue process with the third country jurisdictions in question, to allow them to react to any concerns raised; and
- Listing: once the screening process is complete, third country jurisdictions that refused to cooperate or engage with the EU regarding tax good governance concerns should be put on the EU list.
The selection indicators obtained have been grouped into three dimensions: (i) strength and economic ties with the EU; (ii) financial activity; and (iii) stability factors. Once the selection indicators identified the jurisdictions which were most economically relevant, the Commission conducted a basic assessment of the potential risk level of these jurisdictions facilitating tax avoidance. The risk indicators used were: (i) transparency and exchange of information; (ii) the existence of preferential tax regimes; and (iii) no corporate income tax or a zero corporate tax rate.
These risk indicators were then applied to the most relevant jurisdictions identified by the selection indicators, as well as to five jurisdictions with transparency agreements with the EU.
The report points out that the risk indicators do not pre-empt the in-depth analysis of jurisdictions' tax systems, which will take place in the screening stage. The risk indicators are only intended to provide Member States with as much information as possible to decide on the jurisdictions that they wish to screen.
The Commission press release can be read here [http://europa.eu/rapid/press-release_IP-16-2996_en.htm], while the official pre-analysis can be accessed here [https://ec.europa.eu/taxation_customs/sites/taxation/files/2016-09-15_scoreboard-indicators.pdf].