Members of the European Parliament voted to add UK overseas territories such as the Channel and British Virgin Islands to the tax haven blocklist.
Guernsey and Jersey have also been placed on the list after the UK ended its Brexit transition period on 31 December.
MEPs voted overwhelmingly in favour — by a vote of 587 to 50 — of adding more nations and territories to the list of non-cooperative jurisdictions, also arguing for the inclusion of EU territories such as the Netherlands, Ireland and Malta.
Furthermore, they called for countries which use a 0% tax regime to be automatically blacklisted.
Several jurisdictions have been added and removed and the list since it was first launched in 2017.The Cayman Islands was included on the EU blacklist in February last year, but was then later removed.
MEPs argued that after Brexit, UK territories lacked a layer of protection from inclusion on the blacklist.
A decision to expand the denylist now rests with the 27 member states on the EU’s Economic and Financial Affairs Council.
Robert Palmer, the director of the Tax Justice UK campaign group, said: “Post-Brexit the UK tax havens have lost their protector within the corridors of Brussels. I’d expect to see the EU to ramp up pressure on places like Jersey to clean up their act.
“The UK itself has been warned that if the government tries a Singapore-on-Thames approach, with a bonfire of regulations and taxes, then the EU will act swiftly.”
It comes as government borrowing swells across the globe due to the COVID-19 pandemic, adding pressure to raise more from taxes to repair their public finances.
The Office for National Statistics on Friday revealed that the UK government borrowed another £34bn ($46.5bn) in December.
Public sector net borrowing was £34.1bn last month, an increase of more than 470% compared to December 2019’s figure.
It marked the highest December on record and the third highest month of borrowing since records began in 1993.
Public finance records have repeatedly tumbled during the COVID-19 crisis. Tax income has fallen while government spending has surged due to targeted support to keep the economy afloat. The government has been forced to borrow eye-watering sums as a result.
The government borrowed £270bn between April and December 2020 and the state’s cash requirements last year were nearly double the previous record total. The Office for Budget Responsibility has said government borrowing could reach almost £400bn by March.
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