EU blacklist of tax havens set to shrink further

By Francesco Guarascio

BRUSSELS (Reuters) - European Union states are set to remove Bahrain, the Marshall Islands and Saint Lucia from an EU list of tax havens next week, leaving only six jurisdictions on the list, three months after it was set up, an EU document shows.

The move is likely to bring more disapproval from lawmakers and activists who had strongly criticised a first delisting in January that nearly halved the number of listed jurisdictions to nine from 17.

The new delisting decision was taken by the EU Code of Conduct Group, which includes tax experts from the 28 member states, according to an EU document seen by Reuters.

EU finance ministers are expected to endorse the proposal at their regular monthly meeting in Brussels on March 13.

The six jurisdictions that remain on the blacklist are American Samoa, Guam, Namibia, Palau, Samoa and Trinidad and Tobago.

Bahrain, the Marshall Islands and Saint Lucia were delisted after they made "specific commitments" to adapt their tax rules and practices to EU standards, the document says. Those commitments are not public.

In January, EU governments decided to remove from the blacklist Barbados, Grenada, South Korea, Macao, Mongolia, Tunisia and the United Arab Emirates and Panama.

The delisting of Panama caused particular outcry. The EU process to set up a tax-haven blacklist was triggered by the so-called Panama Papers, a publication of confidential financial documents that showed how wealthy individuals and multinational corporations use off-shore schemes to reduce their tax bills.

Ministers said the January delisting was a sign that the process was working as countries around the world were agreeing to adopt EU standards on tax transparency.

All delisted countries have been moved to a so-called grey list, which includes dozens of jurisdictions that are not in line with EU standards against tax avoidance but have committed to change their rules and practices.

Countries on the grey list can be moved back to the blacklist if they fail to respect their engagements.

Blacklisted jurisdictions could face reputational damages and stricter controls on their financial transactions with the EU, although no sanctions have been agreed by EU states yet.

The blacklist was set up to discourage the use of shell structures abroad, which in many cases are legal but may hide illicit activities.

It took nearly a year for EU experts to screen an initial number of 92 jurisdictions around the world before identifying 17 in December that could favour tax avoidance.

EU countries were not screened. They were deemed to be already in line with EU standards against tax avoidance, although anti-corruption activists and lawmakers have repeatedly asked to blacklist also some EU member states, like Malta and Luxembourg.

(Reporting by Francesco Guarascio; editing by Robert-Jan Bartunek, Larry King)