Macau denies it is tax haven after European Union puts it on blacklist of 17 tax-avoidance havens

The Macau government has strongly denied the city is a tax haven after the European Union put the former Portuguese enclave on a blacklist of those it deems guilty of unfairly offering tax avoidance schemes.

A spokesman for the Macau government on Wednesday called the blacklisting “unilateral and one-sided” and did not speak the truth to the city’s reality.

“[The government] reiterates that [Macau] is definitely not a so called tax-avoidance port or tax haven,” he said.

The spokesman said the government had been cooperating with intergovernmental organisations, such as the Organisation for Economic Co-operation and Development, to crack down on cross-country tax avoidance and encourage fair taxation.

He added that the city established a new tax information exchange law in May to make the city’s tax information more transparent to other countries, and that the government had been studying how to improve regulations on offshore businesses.

Macau lawmaker Au Kam-san said the government had introduced policies to encourage more offshore companies to set up in the city, to achieve higher industry diversity.

But he said he did not know the operations or sizes of these companies and did not understand why the EU rated the city as a tax haven.

“The rating will bring a lot of trouble to Macau as a free port,” Au said. “I believe the government will take actions to address the issue. The government has been responsive to similar issues. For example, it has revised laws to tackle money laundering.”

The vice-president of the European Commission, Valdis Dombrovskis, said after a meeting of the bloc’s finance ministers that beyond the 17 places, more than 40 others were put on a “grey list” to be monitored until they are fully committed to reforms.

“Tax havens will not disappear from our radar and we will keep the pressure on,” he said.

The EU said those blacklisted had refused to cooperate and change their way after almost a year of consultations.

They are: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, St Lucia, Samoa, Trinidad & Tobago, Tunisia and United Arab Emirates.

Panama’s president, Juan Carlos Varela, objected to his country being on the list, saying it is making progress against tax evasion. Panama has been battered by document leaks, including the Panama Papers and Paradise Papers, showing how the rich have stashed wealth in shell companies in Panama and other small nations.

The EU’s penalties on the blacklisted countries still need to be confirmed.

In the meantime, the threat of being blacklisted and sanctioned has spurred many countries to cooperate with the EU, a sign that public shaming alone will have an impact, said EU legislator Tom Vandenkendelaere of the EPP Christian Democrats.

“It has already had a positive impact. To avoid getting on the list, a great many nations have already been cooperative,” Vandenkendelaere said. “In the future, too, most countries will try to avoid being publicly shamed.”

Higher-tax countries like France have pushed for the blacklist as well as a crackdown on tax havens in the EU as well. Lower-tax countries like Ireland and the Netherlands argue that will hurt Europe’s competitiveness.

The Socialists & Democrats group, a leading centre-left political group in the European Parliament, said the blacklist could have been much more inclusive, even including EU countries. Others, too, were asking why countries like Luxembourg, Malta and Britain – whose crown dependency the Isle of Man featured prominently in the Paradise Papers – were not included.

“Tax havens inside the EU are missing. If we want to fight tax avoidance credibly on a global stage, we must also put our own house in order,” S&D legislator Peter Simon said.