Financial Secrecy Affecting the European Union: Patterns Across Member States, and What to Do About It

Abstract

This policy paper complements an academic paper which has been published as a working paper in the Charles University (Prague) Institute of Economics Working Paper Series (“Is Panama really your tax haven? Secrecy jurisdictions and the countries they harm”). This policy paper uses the Bilateral Financial Secrecy Index to evaluate the success of the EU tax haven blacklist and the use of automatic exchange of information treaties in safeguarding against the main providers of financial secrecy targeting EU member states. Jurisdictions blacklisted on the EU tax haven blacklist supply just 1 per cent of the financial secrecy structures targeting EU member states, making the current blacklist ineffective at identifying and safeguarding against the vast bulk of suppliers of financial secrecy to the EU. EU member states have been much more successful in using automatic exchange of information treaties to safeguard against financial secrecy. EU member states have on average covered 82 per cent of the financial secrecy targeting their jurisdiction by having automatic exchange of information treaties in place with the countries supplying financial secrecy structures targeting them. Nonetheless, not a single EU member state has been able to fully safeguard against the greatest contributor of financial secrecy to the EU, the US. Furthermore, the research shows how “golden passport” and residency by investment schemes offered by four European jurisdictions (Cyprus, Ireland, Malta and Monaco) threaten the effectiveness of automatic information exchange in mitigating financial secrecy.