As many as 36 countries could be named and shamed in a new blacklist of tax havens due to be published by the European Union on December 5.
The list forms part of a kickback against what is seen as tax dodging by the rich and famous, in the wake of the Paradise Papers scandal.
Representatives from all 28 EU member states will need to approve the final list, which would replace largely toothless national lists.
According to a draft summary table seen by Bloomberg, 36 jurisdictions that charge little or no taxes could be included on the list. They include Serbia, Armenia, the Cook Islands, the Marshall Islands, Panama and Tunisia.
Turkey could also be included, in a move that could further strain ties between Ankara and the world's largest trading bloc.
According to people familiar with the matter and confidential documents seen by Bloomberg, an EU working group tasked with screening “non-co-operative jurisdictions for tax purposes” concluded that Turkey’s commitments to address transparency issues and abolish sweetheart tax regimes are so far “not sufficient”.
Turkish Finance Minister Naci Agbal hit back at the claims, telling Reuters there would be no reason for the EU to place Turkey on such a list and that Turkey was abiding by all international tax rules.
On the other hand, commitments on tax transparency given by UK territories including Guernsey, the Isle of Man and Jersey have been deemed sufficient, Bloomberg reported.
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The UK government had initially tried to block the EU from sending letters to 12 British overseas territories warning them that they risked being blacklisted as tax havens. However, the correspondence was eventually sent to the jurisdictions after a decision by experts on a European council code of conduct group, which overruled the British protests.
Seven Caribbean jurisdictions have been given additional leeway until February to prove their commitments, because of damage suffered from recent hurricanes.
The Paradise Papers – which made public the tax affairs of numerous companies and investors – gave new impetus to countries willing to counter tax avoidance. But the EU had in fact already been working for more than a year on a common blacklist, in the wake of earlier leaks.
Turning plans into concrete action has not been easy, however. Enforcement is the biggest sticking point, with EU countries split over whether blacklisted countries should be subject to financial sanctions. Several states, including France, support punitive measures, such as exclusion from international funding, though no decision has been taken.
An existing list of tax havens compiled by the Organisation for Economic Co-operation and Development includes only Trinidad and Tobago.
By contrast, the EU is currently screening 92 jurisdictions, while the list is expected to be continuously updated.
States that charge no corporate tax are not automatically considered at risk of breaching EU tax criteria, but they are subject to screening if they also allow the creation of shell companies and other structures that could help tax avoidance.
Countries that fail to respect the bloc’s criteria can avoid being blacklisted if they provide a political commitment and a specific plan to comply.
