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Berlin (dpa) - The federal government is tightening its pace against tax evaders.

The cabinet passed a law by Finance Minister Olaf Scholz (SPD), which makes doing business with countries that do not adhere to international tax standards more difficult.

By canceling tax advantages, Scholz wants to make the flight to tax havens less profitable and encourage the states to rethink.

"We're doing something to dry up tax havens," said the Vice Chancellor.

"Everyone has to make their fair contribution to the tax revenue, not just the bakery next door, but also the major international corporation."

The basis for the German legislative proposal is the EU's black list of tax havens.

The list includes twelve countries, including Panama, Fiji and the Seychelles, which, from an EU perspective, facilitate tax evasion or unfair tax competition.

However, the list is controversial, partly because it does not contain any tax havens within the EU.

Scholz emphasized that the common European approach is important.

"This is how we work together to ensure more global tax justice."

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Among other things, it should no longer be possible in future to claim expenses for operating and advertising expenses from transactions with reference to tax havens.

There should also be new regulations when income is transferred to a company in a tax haven.

In addition, regulations on withholding tax that are incurred on investment income abroad are being tightened.

For the law to come into force, the Bundestag and Bundesrat still have to give their consent.

The hope is that the law will generally deter investors from doing business in the countries listed - and that this will also lead to reforms in the tax havens.

However, critics do not expect it to have a strong impact.

The Greens in Brussels point out that the countries on the EU list account for only two percent of global corporate tax avoidance.

The German Tax Union criticized Scholz's draft as half-hearted because it was too dependent on the EU list.

"He's not a really sharp sword," said union chief Thomas Eigenhaler of the "Saarbrücker Zeitung".

The federal government lacks the political will to blacklist itself.

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The German trade union federation emphasized that all tax havens had to be dried up, including those in the EU.

“That is also a question of fairness,” said board member Stefan Körzell.

The left's financial politician, Fabio De Masi, also criticized: "The EU's list of black tax havens is irrelevant because it excludes US states such as Delaware and EU states themselves," he said.

Comprehensive punitive taxes on financial flows in tax havens are necessary to force international cooperation.

The FDP finance politician Florian Toncar demanded that large international companies also have to pay their fair tax contribution.

At the same time, the federal government must make corporate taxation in Germany more competitive.

© dpa-infocom, dpa: 210331-99-44409 / 2

Black list of the EU