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The thinly veiled threats made by Philip Hammond and Theresa May that the United Kingdom could go into tax haven mode if Brussels doesn't play nice in the Brexit negotiations seem rather empty.

EU membership is no bar to a country adopting aggressive corporate tax policies.

An Oxfam report shortly before Christmas listed the Netherlands, Ireland, Luxembourg and Cyprus among the 15 “world's worst” tax havens. Luxembourg and the Netherlands are characterised by “tax incentives, 0% withholding taxes [and] evidence of large-scale profit shifting,” according to Oxfam. This will come as no surprise to anyone who has followed the career of European Commission president Jean-Claude Juncker, who during 22 years as Luxembourg's finance minister and prime minister oversaw the construction of much of the Grand Duchy's tax architecture.

Ironically, a post-Brexit UK with “competitive tax rates,” as Theresa May put it, could find itself scrutinised for inclusion in a blacklist of tax havens that is being drawn up by EU national government representatives meeting in the secretive Code of Conduct Group (Business Taxation). A first version of the list is due by the end of 2017, but it will be updated thereafter.

Countries risk inclusion in the list if their tax systems are judged insufficiently transparent or harmful, or if they facilitate tax avoidance. Ultimately, the EU could apply some form of yet-to-be-specified sanction to nations on the list. The Netherlands and the EU's other member tax havens would certainly meet the criteria for scrutiny for inclusion in the list – except of course they won't because the list is only for non-EU countries.

By Stephen Gardner.

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