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News : EU Economy Last Updated: Jun 19, 2015 - 7:44 AM

EU's list of 30 tax havens omits the biggest 4 in Europe
By Michael Hennigan, Finfacts founder and editor
Jun 18, 2015 - 8:33 AM

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The coral reef off the small Polynesian island of Niue, which has a population of 1,400 people. The tiny country appears on the European Commission's Top 30 list of tax havens.

On Wednesday the European Commission published a list of the 30 of the world's top tax havens but most are based on small islands and the biggest 4 corporate tax havens in Europe do not fall within the official definition of the rich countries.

The European Commission says it did not decide which countries should be listed. "Rather, it is relaying decisions taken at national level, since this list of non-cooperative jurisdictions is compiled from Member States' own blacklists.

The 'Top 30' of non-cooperative jurisdictions is made up of countries that featured on at least 10 Member States' lists. Ultimately, the aim is to have a common EU approach to defining and reacting to third country non-cooperative jurisdictions. In discussions with Member States on their national blacklists, it became clear that each one uses different criteria to determine which countries to list, and takes different measures (if any at all) against listed countries."

"Nearly one-third of all foreign profits reported by US corporations in 2003 came from just three small, low-tax countries: Bermuda, the Netherlands, and Ireland," said a White House factsheet in 2009. Like the Queen in Shakespeare's 'Hamlet' who protested that 'The lady doth protest too much, methinks,' the Dutch government hypocritically objected to the Netherlands being dubbed a tax haven and the White House deleted the line. The Dutch tax haven, has about 20,000 letter-box companies and in recent years, Facebook joined U2, the Irish rock group, to avail of the system. The Netherlands also hosts thousands of foreign financial vehicles.

Four years later the Irish Government's decision to send a letter to two veteran US senators disputing a report by the US Senate Permanent Subcommittee on Investigations, on Apple's use of three Irish companies for tax avoidance, was a foolish one and there was a swift smackdown from Washington DC.

Michael Collins, the Irish ambassador, wrote to Senator Carl Levin, Democrat of Michigan and chairman of the subcommittee, and Senator John McCain, Republican of Arizona, 2008 presidential candidate and ranking minority member of the subcommittee, claiming Ireland was not a tax haven because it did not meet four key criteria to be a tax haven as identified by the OECD — the Paris-based Organisation for Economic Cooperation and Development, a think-tank for 34 mainly rich countries.

The letter also implied that Ireland had no responsibility for billions in transactions that were routed through three Irish companies because the companies were considered non-resident for tax purposes.

None of the 34 member countries have been termed tax havens as they regard the term an abusive one better suited for islands in sunny climes where arching palms sway over sandy beaches.

However in the real world, Switzerland, the Netherlands, Ireland and Luxembourg, do engage in tax haven activities at a significant level. The sate of Delaware in the US is also a tax haven.

Senator Carl Levin and Senator John McCain, responded to the Irish letter:

"Most reasonable people would agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven."

This week Jesse Drucker of Bloomberg reported that Wal-Mart Stores Inc., America's biggest retailer, owns more than $76bn of assets through a web of units in offshore tax havens around the world, "though you wouldn’t know it from reading the giant retailer’s annual report."

The Bloomberg report says a new study has found that Wal-Mart has at least 78 offshore subsidiaries and branches, more than 30 created since 2009 and none mentioned in US securities filings. Overseas operations have helped the company cut more than $3.5bn off its income tax bills in the past six years, its annual reports show. "Units in Luxembourg — where the company has no stores — reported $1.3bn in profits between 2010 and 2013 and paid tax at a rate of less than 1%, according to the report."

“Ireland’s not a tax...eh...you know, eh, haven for unorthodox practice in respect of tax. It’s very clear, it’s very transparent,” Enda Kenny, taoiseach, said in Davos Switzerland in January 2013 and repeated the lie many times since.

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