On Feb. 17, finance ministers of the European Union (“EU”) updated the list of non-cooperative jurisdictions for tax purposes, adding the Turks and Caicos Islands and Việt Nam to the list while removing Fiji, Samoa, and Trinidad and Tobago. With this update, the list now includes 10 countries.
What might appear to be a minor technical adjustment actually carries far broader political and symbolic weight. On the one hand, it reflects the European strategy to combat international tax avoidance. On the other hand, it involves Việt Nam, a state governed by a Communist Party that is now labeled a “tax haven.” This apparent paradox deserves deeper analysis.
What is the EU “Blacklist”?
Since 2017, the EU has maintained a list of jurisdictions deemed non-cooperative for tax purposes. Its creation followed major scandals such as the Panama Papers, a massive leak of documents from the Panamanian law firm Mossack Fonseca that revealed how politicians, business leaders, and multinational corporations used offshore entities to evade or circumvent tax obligations.
There was also the LuxLeaks case, which exposed confidential tax rulings granted by Luxembourg to large multinational companies to drastically reduce their tax burdens. In the wake of these scandals, European public opinion demanded greater tax fairness and, above all, transparency.
However, the list should not be understood as a ranking of countries with the lowest tax rates. The official criteria for classification are based on three main areas: tax transparency and automatic sharing of information; fair taxation, especially focusing on harmful special tax rules; and following the recommendations from the Organisation for Economic Co-operation and Development (OECD) to fight against base erosion and profit shifting, which is when multinational companies move profits to low-tax countries to lower their overall tax bill, causing high-tax countries to lose billions in revenue over the last twenty years.
A country is therefore added to the list when it fails to comply with these standards or does not implement promised reforms within a given timeframe. Consequently, the label “tax haven” in European political language does not necessarily coincide with the traditional idea of zero taxation and strict banking secrecy.
The Inclusion of Việt Nam
The case of Việt Nam is particularly striking, especially when viewed in light of 21st-century transformations. Governed by the Communist Party of Vietnam, the country maintains a centralized political structure and significant state control over key sectors of the economy.
However, since the late 1980s, with the Đổi Mới reforms, Hà Nội has progressively opened its markets, attracted foreign capital, and integrated the national economy into global flows. Today, Việt Nam is one of Asia’s most dynamic manufacturing hubs. It has signed strategic trade agreements, including the EU-Vietnam Free Trade Agreement (EVFTA), which entered into force in 2020.
This agreement gradually removes almost all customs duties, opens up service markets and public procurement for both sides, and includes commitments on environmental standards, labor rights, and intellectual property protection, all aimed at strengthening Việt Nam’s integration into European supply chains and enhancing economic cooperation between the two regions.
Moreover, Việt Nam has emerged as an alternative manufacturing base to China for many multinationals amid US-China trade tensions, rising Chinese labor costs, and “China+1” strategies that diversify production and reduce geopolitical risk.
Việt Nam offers several competitive advantages: a young and relatively low-cost workforce, political stability, a growing network of free trade agreements (not only with the EU but also through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTP) and Regional Comprehensive Economic Partnership (RCEP)), rapidly developing infrastructure, and a government strongly oriented toward attracting foreign direct investment. Sectors such as electronics, textiles, technological component assembly, and light manufacturing have seen significant inflows of international capital.
In practical terms, many companies that once concentrated production exclusively in China now maintain Chinese facilities for the domestic market while opening plants in Việt Nam for global exports, taking advantage of lower costs and a more favorable trade environment. This process has transformed Việt Nam into a crucial component in global value chains, positioning it as one of the most dynamic manufacturing hubs in Southeast Asia.
From a fiscal perspective, the standard corporate income tax rate in Việt Nam is moderate compared to other emerging economies. However, the system provides preferential regimes for special economic zones, high-tech investments, strategic infrastructure projects, and priority development sectors.
In certain instances, the system can significantly reduce the effective tax burden for foreign investors. This is where European concerns arise: not so much regarding the headline tax rate, but rather concerning the architecture of preferential regimes and compliance with OECD rules.
The Ideological Paradox: A Communist Country as a Tax Haven
It is inevitable to note the symbolic dimension of the EU decision. In the Western imagination, a “tax haven” is often associated with liberal microstates or Caribbean offshore centers. Communism, by contrast, evokes ideas of state planning, public control, and historically high taxation and redistribution.
Yet Việt Nam demonstrates that the ideological distinction between capitalism and communism is today far less clear-cut than 20th-century categories would suggest. The country is politically socialist but economically pragmatic. It has not adopted a rigid Soviet-style centralized planning model; rather, it operates under a hybrid system: a strong state, an open market, and selective incentives designed to attract capital.
In this sense, the European definition does not concern ideology but the technical structure of fiscal policies. Nonetheless, the media effect is powerful, as it places a communist government on the same list as offshore jurisdictions. It is a snapshot of globalization overturning stereotypes.
The decision also raises questions about the coherence of the EU’s own tax policy. Many observers point out that within the EU there are significant differences among member states in terms of tax rates, preferential regimes, and aggressive tax planning.
The fact that the list includes relatively small or peripheral territories, while some major global financial hubs do not appear, fuels criticism about the selectivity of the mechanism. The EU insists that the criteria are objective and based on technical parameters, but public perception does not always align with this narrative.
The inclusion of Việt Nam may also be interpreted as a political signal: a call for full compliance with OECD standards, particularly at a time when a global minimum tax for multinational corporations is under discussion.
Does Europe Pay Too Much Tax?
The idea that Việt Nam’s presence on the list should prompt reflection on European tax pressure is gaining significant traction. Many EU countries impose high taxes on businesses and labor, setting them apart from other global regions.
However, the comparison requires caution. Europe finances universal healthcare systems, public education, pensions, and infrastructure through tax revenues. The European social model entails structural costs that other systems do not bear to the same extent.
The issue is not simply “who taxes more,” but what development model is being pursued. By advocating for global standards, the EU aims to prevent a tax competition that could weaken the foundations of its social system.
For Việt Nam, inclusion on the list may lead to defensive measures by EU member states: increased tax scrutiny, limitations on the deductibility of payments to Vietnamese entities, and restrictions on access to European funds.
However, recent history shows that the list is not immutable. Fiji, Samoa, and Trinidad and Tobago were removed after adopting reforms. It is plausible that Hà Nội will work to align quickly with the required standards.
From a diplomatic standpoint, the EU decision does not appear to signal a rupture in relations. The EU remains a key trading partner for Việt Nam. Rather, the move functions as a technical pressure mechanism to accelerate specific reforms.
The episode fits into a broader global context. The OECD and the G20 have promoted the introduction of a global minimum tax for multinational corporations to reduce aggressive tax competition. The EU positions itself as a promoter of this new fiscal order.
The inclusion of Vietnam in this scenario sends a clear message that no country, regardless of its political system, is exempt from complying with shared rules. Tax policy has become an instrument of international governance and not merely domestic policy.
Calling Việt Nam a “tax haven” may indeed seem paradoxical, particularly given its political identity. Yet the contemporary world ignores simplistic ideological categories. The fundamental question remains open: will Europe succeed in promoting coherent global tax governance without appearing selective or instrumental? And will Việt Nam, balancing state control and market openness, manage to adapt while maintaining competitiveness?
The answer to these questions concerns not merely a list of 10 jurisdictions, but the entire fiscal architecture of the new millennium.
