Tax Evasion, Money Laundering and Tax Transparency in the EU Overseas Countries and Territories

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Tax Evasion, Money Laundering and Tax Transparency in the EU Overseas Countries and Territories Tax evasion, money laundering and tax transparency in the EU Overseas Countries and Territories Ex-Post Impact Assessment Tax evasion, money laundering and tax transparency in the EU Overseas Countries and Territories Tax evasion, money laundering and tax transparency in the EU Overseas Countries and Territories Ex-Post Impact Assessment Study At their meeting of 12 October 2016, the coordinators of the European Parliament’s Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion (PANA) took the decision to request from the Directorate General for European Parliamentary Research Services (EPRS) to produce the following study: ‘Assessment of the legal, political and institutional framework on offshore practices related to tax evasion, money laundering and tax transparency in the EU Overseas Countries and Territories (OCT), as defined in Annex II (TFEU), and the relations of the OCTs with EU Member States.’ The opening analysis was prepared in-house by the Ex-Post Evaluation Unit of the Directorate for Impact Assessment and European Added Value, within EPRS, whereas the specific contributions on individual Member States were commissioned from external experts. It is hoped that this analysis will feed into ongoing discussions in the PANA inquiry committee on the effective implementation and enforcement of EU law in relation to money laundering, tax avoidance and tax evasion in and by Member States and their associate and dependent territories. Abstract This study aims to present the legal, political and institutional framework governing offshore practices in the Overseas Countries and Territories (OCTs) of the European Union, which fall under the sovereignty of four Member States: Denmark, France, the Netherlands and the United Kingdom. It contains an opening analysis that defines the key concepts, including tax evasion, money laundering and tax transparency; outlines the scope of the study (to differentiate the OCTs from other places often mentioned within the context of offshore financial services); and briefly describes the particular case of Greenland. In addition, a comparative analysis of the legal, political and institutional framework governing EU relations with and within the respective OCTs is complemented by an overview of the EU framework and opportunities for action. This aspect can be of significance, especially in view of the UK’s announced withdrawal from the European Union. The detailed annexed contributions covering the OCTs under French, Dutch and British rule, and which constitute a basis for this analysis, were written by external experts. Ex-Post Impact Assessment AUTHORS Dr Isabelle Ioannides and Jan Tymowski, Ex-Post Evaluation Unit To contact the Unit, please email: [email protected] ABOUT THE PUBLISHER This paper has been drawn up by the Ex-Post Evaluation Unit of the Directorate for Impact Assessment and European Added Value, within the Directorate-General for Parliamentary Research Services of the Secretariat of the European Parliament. LINGUISTIC VERSIONS Original: EN This document is available on the internet at: http://www.europarl.europa.eu/thinktank DISCLAIMER AND COPYRIGHT This document is prepared for, and addressed to, the Members and staff of the European Parliament as background material to assist them in their parliamentary work. The content of the document is the sole responsibility of its author(s) and any opinions expressed herein should not be taken to represent an official position of the Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the European Parliament is given prior notice and sent a copy. Manuscript completed in April 2017. Brussels © European Union, 2017. PE 593.803 ISBN 978-92-846-0819-5 doi:10.2861/080148 QA-02-17-310-EN-N PE 593.803 4 Tax evasion, money laundering and tax transparency in the EU Overseas Countries and Territories Contents Executive summary ....................................................................................................................... 7 Acronyms ........................................................................................................................................ 9 1. Introduction ......................................................................................................................... 10 2. Objectives of the study........................................................................................................ 10 3. Methodology and structure of the study ......................................................................... 11 4. Key concepts ........................................................................................................................ 12 4.1. Definitions of tax evasion, money laundering and tax transparency ................. 13 4.2. Identifying the Overseas Countries and Territories .............................................. 15 4.3. Which territories are not examined ......................................................................... 17 5. The case of Greenland ......................................................................................................... 20 6. Comparative analysis of the case studies ......................................................................... 22 6.1. Legal framework ........................................................................................................ 22 6.2. Political framework.................................................................................................... 25 6.3. Institutional framework ............................................................................................ 27 7. The EU framework .............................................................................................................. 30 7.1. EU initiatives on tax evasion, money laundering and tax transparency ............ 30 7.2. EU influence on the OCTs ......................................................................................... 33 7.3. Openings for a more pro-active EU ......................................................................... 35 8. Conclusions: the way forward ........................................................................................... 36 9. References ............................................................................................................................. 38 List of Tables Table 1: Key data on the EU Overseas Countries and Territories ......................................... 15 Annexes Annex I - In-depth analysis evaluating the legal, political and institutional framework concerning offshore practices related to tax evasion, money laundering and tax transparency in the Overseas Countries and Territories (OCT) of France, as defined in Annex II of the Treaty on the Functioning of the European Union (TFEU), and the relations of France with those OCTs ........................................................................................................ 41 PE 593.803 5 Ex-Post Impact Assessment Annex II - In-depth analysis evaluating the legal, political and institutional framework concerning offshore practices related to tax evasion, money laundering and tax transparency in the Overseas Countries and Territories (OCTs) of the Kingdom of the Netherlands, as defined in Annex II of the Treaty on the Functioning of the European Union (TFEU), and the relations of the Kingdom of the Netherlands with those OCTs ... 93 Annex III - In-depth analysis evaluating the legal, political and institutional framework concerning offshore practices related to tax evasion, money laundering and tax transparency in the Overseas Countries and Territories (OCTs) of the United Kingdom, as defined in Annex II of the Treaty on the Functioning of the European Union (TFEU), and the relations of the United Kingdom with those OCTs ........................................................ 145 PE 593.803 6 Tax evasion, money laundering and tax transparency in the EU Overseas Countries and Territories Executive summary The release of the Panama Papers has triggered additional efforts – including by the European Parliament – to understand the relationship, on the one hand, of the Overseas Countries and Territories (OCTs), some of which are commonly considered as tax havens, and, on the other, of the EU Member States to which they are related (Denmark, France, the Netherlands and the United Kingdom). Notwithstanding the importance of according equal attention to other outermost regions, including those that are of concern in the areas of financial services and taxation, this study limits its analysis to the OCTs listed in Annex II of the Treaty on the Functioning of the European Union (TFEU). With regard to the OCTs’ legal status, the situation differs between the individual Member States and between the territories subject to their sovereignty. While some of them, including those active in financial services that ‘belong’ to the UK and three countries of the Kingdom of the Netherlands (Aruba, Curaçao, and Sint Maarten), seem to have reached a status of quasi-independent countries with significant freedom for self-governance, others (especially the French OCTs) remain formally autonomous but under the clear and tight control of the Member State. In the case of Greenland, which is the only OCT associated with Denmark, its decision to withdraw from the EU might eventually lead to full independence once the economic situation allows. The institutional
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