The Commission's analysis of the current situation is that Member States recognise the potential and actual damage caused by jurisdictions not complying with minimum standards of good governance in tax matters, among which jurisdictions commonly considered as tax havens.
All Member States have responded in a different way to this situation. Taking into account the freedoms awarded to them when operating in the internal market, businesses may structure arrangements with such jurisdictions via the Member State with the weakest response. As a result, the overall protection of Member State's tax revenues tends to be only as effective as the weakest response of any one Member State. This does not only erode Member States' tax bases but also endangers fair competitive conditions for business and, ultimately, distorts the operation of the internal market.
With a view to tackling this problem the Commission recommends the adoption by Member States of a set of criteria to identify third countries not meeting minimum standards of good governance in tax matters and a ‘toolbox’ of measures in regard to third countries according to whether or not they comply with those standards, or are committed to comply with them. Those measures comprise the possible blacklisting of non-compliant jurisdictions and the renegotiation, suspension or conclusion of Double Tax Conventions (DTCs). To avoid promoting business with backlisted third countries, the Commission invites Member States to take additional complementary actions but in full respect of EU law.
Furthermore, Member States should consider ad hoc detachments of experts to assist tax administrations in third countries that commit to complying with minimum standards but are in need of technical assistance.
This Recommendation is an important practical first step to align the attitudes taken by Member States in regard to jurisdictions not applying minimum standards in the area concerned. To assess the need for possible further initiatives, the Commission will re-evaluate Member States' approach and actions in this area within three years after the adoption of the Recommendation.
