Between norm entrepreneurship and norm coercion? The influence of European Policies on Tax Evasion on Asian Financial Centres

Abstract

This paper explores a new contentious element in Europe's relations with Asia - the impact of EU efforts to combat tax evasion and the pressures exerted on Asian financial centers to adopt EU regulatory preferences and practices. Particular attention is paid to the role of 'coercive diplomacy' to advance European regulatory standards, norms, and practices in Hong Kong and Singapore that are considered - rightly or wrongly - as tax havens. Europe's financial and economic problems have increased both public sentiments on tax evasion and exacerbated the fiscal necessity to tackle tax evasion and harmful tax competition. European policy-makers and regulators are adopting more stringent and punitive mechanisms (such as grey- and blacklists) to achieve their fiscal objectives and simultaneously assuage the public expectations. Pressure is being exerted on Hong Kong and Singapore to sign tax agreements (AEOIs, CDTAs, TIEAs) and stem the outflow of capital from Europe into their wealth management and private banking industries. The paper analyses the dynamics of regulatory adaptation between the EU and Hong Kong and Singapore and critically assesses the effectiveness and legality of the precedents that the EU - as a regulatory unit - is setting in its broader relations with Asia. The paper casts doubt on the conceptualization of the EU as a 'norm entrepreneur' and 'normative power' by revealing how its intention to lead by example is mitigated by more immediate financial needs and the perceived demands of public opinion in key EU member states.