MB Feb | Shades of gray

Macau has just been removed from the European Union’s list of non-cooperative fiscal jurisdictions. Or, in plainer everyday language, the so-called blacklist of offshore fiscal havens. Let us be clear: being on a blacklist, whatever the reasons, is not usually a good thing.

José I. Duarte

Economist, Macau Business Analyst

Even when, as is the case, the EU has not decided upon what to do with the list and thus beyond naming and shaming it will have little immediate impact. There are voices in Europe demanding sanctions or other types of punitive measure but they are still just calls, not decisions or actions.

A gray list may not be ideal but it is surely perceived to be better than a black list. Consequently, the move from one list to another is indeed good news – and the happiness of the concerned public departments, in particular the Secretary for the Economy, is fully understandable. It is not, however, the end of the affair.

There are a couple of reasons for this. First, it is difficult to understand how the inclusion in the worst pack of offenders happened at all at this phase of the process. Second, the underlying and longer-term issues that led to the inclusion on the list have not magically disappeared.

If we look into the news and documents provided by the EU services, Macau was included on a long list of countries under observation for matters relating to tax evasion (and money laundering is usually not much behind). Following a period of investigation, some problems or shortcomings were listed in a final report. Seemingly, Macau was informed about the contents of the report. And, if we believe the information coming out of Europe, was provided with advance knowledge on the conclusions of that investigation.

It was clear that those issues, if unaddressed, could lead to the inclusion on the blacklist. But there was an alternative, at least in what concerns this moment of the process. The inclusion might have been avoided if there was a stated commitment to address the issues identified in the report. So, for the layman on the street, at least, it appears that the inclusion with the worst alleged transgressors might have been avoided. It just required a commitment to addressing these issues in the future, transmitted through the proper channels.

It is almost inevitable to conclude that someone, somewhere, either misread or underestimated the public relations impact of the matter, not to mention the possibility of other more substantial and enduring economic or financial effects. Or that someone was simply distracted, not paying enough attention.

Macau has a representation at the EU and also has bilateral agreements with the EU in this area. However, the external representation of the territory is made though the central government’s foreign affairs services. That said, the potential list of culprits is long enough to be pointless to speculate here about where the responsibility might fall. May the episode help all the services involved maintain more focus in future instances and avoid embarrassments that can be, at first glance, easily avoided.

The second issue is more complicated to deal with, especially if the listing leads to concrete actions that may constrain international financial relations and affect business activities. Being suspected of malfeasance, whether deserved or not, sticks to a jurisdiction a kind of presumed guilt label hanging around its neck. That may, in many obvious and less obvious ways, affect financial operations, business relations, and all kinds of private transactions. Inevitably, financial flows and private transactions will be subject to increased attention and scrutiny.

The world gaze is not what a place that aspires to become a world-class leisure and tourism location is looking for.