EU May Include Turkey on a Blacklist of Tax Havens

An EU working group tasked with screening “non-cooperative jurisdictions for tax purposes” concluded that Turkey’s commitments to address transparency issues and abolish sweetheart tax regimes are so far “not sufficient,” according to people familiar with the matter and confidential documents seen by Bloomberg. The so-called Code of Conduct group could recommend to EU finance ministers to add non-compliant countries to a blacklist on Dec. 5.

While EU countries are split over whether financial sanctions should be used against such uncooperative jurisdictions, inclusion in the blacklist may result in reputational damage to Turkey and raise pressure on EU companies to hold back investment. Several states, including France, support punitive measures, such as the exclusion from international funding, though no decision has been taken.

The potential blacklisting comes as Germany is wielding its influence with international development institutions to restrict financing to Turkey from the state-owned KfW bank, the European Investment Bank and the European Bank for Reconstruction and Development. German commercial banks are also reviewing their exposure to Turkey, officials familiar with the matter told Bloomberg last month, days after Chancellor Angela Merkel said that the EU may cut pre-accession funding to Turkey as a response to the country’s crackdown on its democratic institutions.

Turkey can still dodge inclusion on the list, but time to provide sufficient additional commitments before next month’s meeting of the EU’s finance ministers is running out. In a discussion among the members of the Code of Conduct group on Wednesday, the U.K. representative pointed out that Turkey is an important partner of the EU, but experts said that any decision to bypass technical criteria for the inclusion on the list can only be taken at a political level, according to a participant in the meeting.