BRUSSELS (Reuters) - European Union finance ministers called on Tuesday for a blacklist of tax havens to be drawn up for approval next month as part of kick back against what it sees as tax dodging by the rich and famous.

Swiss Economy Minister Johann Schneider-Ammann (L) and Estonian Finance Minister Toomas Toniste (R) take part in a European Union finance ministers' meeting in Brussels, Belgium November 7, 2017. REUTERS/Yves Herman

Underlining the difficulty of such an approach, however, they were divided over how to impose sanctions on countries that help tax avoidance, which is often legal.

The ministers made the issue the main topic of their monthly meeting after release of the “Paradise Papers”, a trove of financial documents mostly from offshore law firm Appleby. The papers made public the tax affairs of numerous companies and investors.

To reduce the appeal of jurisdictions that charge little or no taxes, EU ministers discussed plans for a common blacklist that would shine the light on such countries.

“There was strong support for the idea of moving forward quickly,” Estonia’s Finance Minister Toomas Tõniste, who holds the EU’s rotating presidency, told reporters.

He added that “most countries” wanted the adoption of the list next month, tacitly acknowledging however that not all the 28 EU member states were equally keen to go that fast.

Jurisdictions in the limelight include offshore banking centers such as Jersey and Bermuda. But some EU countries, notably Luxembourg and Malta have also been criticized for acting as tax havens.

The main sticking point for the EU is whether blacklisted countries should be subject to sanctions.

“I am not sure if there will be sanctions,” an EU official said, citing differences among member states, who need to unanimously back proposals on tax matters.

Luxembourg and Malta, for example, said that sanctions would be unnecessary because investors would be deterred from putting money in highlighted tax havens, an EU official who attended the meeting said.

But many other EU countries want real punishment for non-cooperative jurisdictions accused of drawing away tax revenues from EU states.

French Finance Minister Bruno Le Maire, for example, urged EU states to consider suspending funding for tax havens.

“We are thinking, for instance, about the possibility of cutting financial support of the international institutions like the IMF (International Monetary Fund) or the World Bank on the states that would not provide the needed information on tax,” he told reporters before the meeting.

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Although many states backed the idea of sanctions, Le Maire’s proposals did not gather much support, as it may be difficult to convince international organizations to apply the measures.

The EU commission’s vice president Valdis Dombrovskis declined to comment on the French proposals. “We hope an agreement on the blacklist will be possible by the end of the year,” he told a news conference.

He however stressed that “countermeasures” for non-cooperative countries were needed.

NEW MOMENTUM?

The Paradise Papers revelations gave new impetus to EU countries willing to counter tax avoidance, but turning plans into concrete actions is not easy.

Similar leaks last year led to a deluge of legislative proposals by the EU commission, but most of them are still stuck in talks among EU states.

The EU has been working for more than a year on the common blacklist that would replace largely toothless national lists.

An existing list of tax havens compiled by the Organisation for Economic Cooperation and Development (OECD), a global group of mostly rich nations, currently includes only Trinidad and Tobago.

By contrast, the EU is currently screening about 50 countries that may not respect the bloc’s criteria on tax cooperation.

The final number is likely to be much lower than that, officials said without giving details on screened jurisdictions.

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 facilitate the creation of shell companies and other structures that could help tax avoidance.

Screened countries are expected to make commitments by the end of November, an EU official said, adding that states hit by recent hurricanes were given more leeway.