UK territories such as Jersey, Guernsey and Cayman Islands should not be singled out because of zero-rate tax, argues David Gauke

The UK government is fighting a rearguard action to prevent Guernsey, Jersey and British overseas territories from going on an EU blacklist of tax havens.

At a meeting of EU finance ministers on Tuesday in Brussels, David Gauke, chief secretary to the Treasury, will tell his counterparts that the UK opposes attempts to put territories with a zero rate of corporation tax on an EU list of “non-cooperative” jurisdictions.



The EU vowed to draw up a blacklist of tax havens following the revelations in the Panama Papers, an unprecedented leak of 11.5m files from the database of the world’s fourth-biggest offshore law firm, Mossack Fonseca. Brussels pledged to throw light on the shady “treasure islands” that help multinationals and wealthy clients avoid paying tax.

Crown dependencies Jersey, Guernsey and the Isle of Man, as well as British overseas territories Bermuda and the Cayman Islands, are among the jurisdictions that have a zero rate of corporation tax, according to the EU’s executive arm, the European commission, in a recent analysis of risk factors intended to show whether a jurisdiction may be promoting tax avoidance.



The commission has been leading the charge for greater transparency on tax havens and wants to draw up a list of “non-cooperative jurisdictions” by the end of next year.



Brussels officials think that a zero or near-zero rate of corporation tax in a non-EU country should be a red flag for “unfair taxation”.

But EU member states are split on whether zero corporate tax rates should count in the criteria for determining whether a country is a “non-cooperative jurisdiction”, according to draft conclusions seen by the Guardian. The UK, Ireland, Sweden, the Baltic states, the Netherlands and Luxembourg are blocking a plan to put jurisdictions with a zero or almost zero rate on the blacklist.

These countries argue that the EU has no right to penalise outside jurisdictions for setting zero rates because corporate tax is not an EU competence. In contrast, Germany and France think zero rates should automatically mean a country is deemed “unfair” on taxation and goes on to the blacklist.

The division may frustrate hopes of agreeing the blacklist criteria on Tuesday, as EU tax policy has to be agreed unanimously.



The UK is also pressing to allow potential blacklistees more time to meet the EU criteria: jurisdictions would be allowed until 2020 to meet all EU rules on transparency, rather than 2017.



Although the UK is not the only country looking for extra time, London’s support for delays has caused anger, because Britain could have left the EU before the rules would come into effect.



Sven Giegold, a German Green MEP, said he did not have a problem with the UK raising its voice as an EU member state, but the British government should not be allowed to set deadlines that clashed with the Brexit timetable.

“It is particularly nasty that the UK does not only want to weaken the criteria of the blacklist but also wants a transitional period until [31 December] 2019,” he told the Guardian. “Such negotiation strategies are inconsistent [and] unfair during a Brexit process. We must not allow any precedent in this regard.”



If Theresa May keeps to her preferred timetable of triggering EU exit talks by the end of March 2017, the UK could have left the EU by mid 2019.



The MEP added: “We need a strong EU blacklist of tax havens. It is unacceptable that member states are trying to water down the good draft of the commission.”

Aurore Chardonnet, tax and inequality adviser at Oxfam, said the EU would be missing an opportunity by failing to target zero corporation tax rates.

“The EU should be explaining to people that some jurisdictions are providing advantages to some multinationals to help them avoid paying taxes,” she said. “We cannot only blame the multinationals by doing name and shame. We need to target those countries that are helping those multinationals avoid paying tax. It is not only a matter of secrecy, it is also a matter of the tools they give to those multinationals.”

A spokeswoman for the European commission said it would continue to insist on including “extremely low rates” of corporate tax being considered as part of the criteria”, adding that transitional periods should be “as short as possible”.