Thu | Nov 15, 2018

Editorial | EU frays partnership with CARICOM

Published:Tuesday | December 26, 2017 | 12:00 AM

It may be impractical, as Roosevelt Skerrit himself immediately recognised, for the Caribbean Community, as the Dominican prime minister proposed, to create its own blacklist of European Union (EU) countries deemed to have committed grievous infractions against the welfare of CARICOM states. For, even if the list was legitimate, the small, developing and mostly island states of the Caribbean lack the global muscle that would be required to enforce the sanctions, frightening other countries into respecting their intent.

But what the Caribbean lacks in political and economic might, it compensates for with the intellect CARICOM has to deploy against the EU if the community is convinced that its members have been unfairly placed on the black and watch lists of tax havens. In this regard, CARICOM has to make its case not only to the EU but the entire world, seeking to win the argument by force of logic.

Tax avoidance and evasion has become an extremely emotive issue since the leak of the Panama Papers, followed recently by the Paradise Papers. They suggest that rich people often used murky arrangements to hide their assets abroad and to escape paying taxes at home.

Many, if not most, of the jurisdictions that facilitate such schemes fall under the sovereign umbrella of EU states.

The EU appears keen to have things change, although its efforts appear to be more robust against non-EU affiliates. Last week it published a blacklist of 17 countries, including CARICOM members Barbados, Grenada, St Lucia and Trinidad and Tobago, that ostensibly failed to meet “agreed tax good governance standards”.

Additionally, another four CARICOM members - Antigua and Barbuda, The Bahamas, Dominica and St Kitts and Nevis - are among eight Caribbean countries not named on any list, reprieved for now because they were severely damaged by hurricanes over the summer. Forty-seven other countries, some of them colonies and dependencies of EU states, are on a “grey list”  -  deemed not to have done enough to combat tax evasion, but promising to become compliant with the EU’s regime.

CARICOM, however, argues that the blacklisting of its members ignores the region’s efforts “to comply with the onerous regulatory measures, and standards for tax transparency, accountability and cooperation, enunciated by the Organisation of Economic Cooperation and Development (OECD) and associated institutions, such as the Global Forum and the Financial Action Task Force (FATF)”.

Moreover, it says, the EU is attempting to “coerce compliance“ with benchmarks that were unilaterally determined, some of which are not applicable to EU members. That, from our perspective, would be patently unfair.  

Of greater significance, though, is the argument that the proposed reforms will hurt the vulnerable economies of these island states, which are still to recover from the Great Recession, exacerbated by the failure of the international community to fulfill its promise, made at the onset of the crisis, to help the region with resources to alleviate its debt burden. In other words, any move to comply with EU requirements has to take account of the economic realities of CARICOM states, which, additionally, need time, as well as technical support to adjust, given the complexities of the issues involved.  

The EU and CARICOM, in the many fora in which they operate, not least being the free trade pact they signed eight years ago, were presumed to have developed a genuine partnership. But the threats of hurtful sanctions and the creation  and what CARICOM calls a ‘false narrative”with the potential for reputational damage, could well fray, and possibly do irreparable damage to that relationship. The onus is on the EU to mend the strands.