EU agrees on blacklisting countries helping in hiding money

PARIS: European Union (EU) on Saturday agreed on blacklisting the countries extending cooperation in attempts to conceal money  The EU six powerful economies called for a crackdown on tax havens, urging the G20 powers to end the secrecy of shell companies that enables tax evasion and money laundering. In the strongest reaction yet to the leaked ‘Panama Papers,’ the finance ministers of Britain, France, Germany, Italy and Spain also proposed a blacklist of havens like Panama if they do not share corporate registry data. "The recent extensive leaks from Panama show the critical importance of the fight against tax evasion, aggressive tax planning and money laundering," the five EU ministers said in a statement.

The proposal was made as the Spring Meetings of the World Bank and International Monetary Fund kicked off in Washington, with fighting tax evasion among issues under discussion to help countries strengthen finances and boost growth. World Bank President Jim Yong Kim said the illicit financial activities enabled by tax havens undermined the fight against poverty.

"When taxes are evaded, when state assets are taken and put into these havens, all of these things can have a tremendous negative effect on our mission to end poverty and boost prosperity," he said.

In a letter to the G20 leading economies, meeting simultaneously in Washington, the five EU finance ministers proposed establishing transnational registries that would identify the beneficial owners of companies, trusts, foundations and other entities that had been able to hide from tax administrators and law enforcement.

That would extend the steps already taken under the 2014 "Common Reporting Standard" (CRS) agreement on sharing information about assets and accounts of signatories' nationals.

Corrupt officials and criminals still can exploit cracks and loopholes to hide illicit financial activities despite that pact, the ministers said.

"The current events show that identifying the ultimate beneficial owner behind corporate structures is key to fighting tax evasion, money laundering and illicit finance effectively," German Finance Minister Wolfgang Schaeuble said in a news conference.

The move was a reaction to the leak of thousands of documents on anonymously-owned shell companies from Mossack Fonseca, a Panamana law firm that specialised in setting up such firms. The trove showed the use of shell companies by prominent politicians including close associates of Russian President Vladimir Putin, family members of Chinese leaders, British Premier David Cameron, and the leaders of Iceland and Argentina.

The leak placed Panama in the spotlight as one of the leading havens that have not joined the CRS agreement on sharing information on bank accounts and other assets.

The five threatened to create a blacklist of countries which do not cooperate on sharing data. "We want to have lists which make it possible to place sanctions on countries which don't respect the rules," French Finance Minister Michel Sapin said. Under pressure, Panama said it was ready to begin working together with the CRS system.

"Panama's path to financial transparency is irreversible," Vice President Isabel de Saint Malo de Alvarado said in a statement. "We are fully and immediately committed to the implementation of bilateral automatic exchange of information consistent with the goals of the Common Reporting Standards."

But the Oxfam anti-poverty group, which released a paper showing how top US coproations have socked away $1.4 trillion in profits in tax havens, said the European proposals are still too weak. "If the proposed registry of beneficial owners of companies and trusts is hidden from the public, how can we know who is hiding their profits and fortunes and trying to avoid paying their fair share?" they said.