Tunisia is not a tax haven

The wave of moralisation against tax havens is well and good but punishing countries such as Tunisia hardly speaks of a well-thought-out neighbourhood policy in Brussels.
December 24, 2017

Imagine the surprise when those who know Tunisia well discovered that EU finance ministers blacklisted North Africa’s smallest country as one of 17 tax havens.

Whatever its faults and the corruption that, as in many Mediterranean countries, needs to be reined in, Tunisia never has been a fiscal paradise nor is it one today. This is the case despite the bumpy political ride the country has experienced since its autocratic ruler Zine el-Abidine Ben Ali was toppled nearly seven years ago.

The reasons given for including Tunisia on the blacklist are very technical and the ministers sug­gested that its name could be taken off soon. Whatever the ins and outs of the technical reasons adduced for including Tunisia, the country’s reputation as a safe place for for­eign investors has been damaged when it was least needed.

One can only assume the techni­cal report to the EU finance minis­ters responsible for the decision to include Tunisia on the list was the result of a misunderstanding.

The decision is most unwel­come because Tunisia has faced down the threat of jihadi terrorism two-and-a-half years after attacks on the Bardo National Museum in Tunis and the beachside resort of Sousse led to a huge drop in the number of European tourists visiting the country. This damaged export earnings and employment in a sector that is an important engine of growth.

The lesser jihadi terrorist threat today is a key reason tourists are returning and foreign investors are, once more, looking at the country.

The wave of moralisation against tax havens is well and good but punishing countries such as Tunisia hardly speaks of a well-thought-out neighbourhood policy in Brussels.

At a time when the EU Commis­sion is trying to craft a common approach to the African immi­grants flooding across the Medi­terranean from Libya to Italy, one might have thought that European leaders had the common sense to avoid throwing a grenade in the direction of Tunisia.

The turmoil in Libya is costing Tunisia two percentage points of lost GDP growth every year — this year it will grow at 1.3% — which is considerable. Indeed, were the economy able to grow at 3.3% annually, the room to enact bold economic reforms would be that much greater.

Europe — in particular, France and the United Kingdom — ap­pears to have forgotten that it was NATO’s use of force, at their and America’s initiative, that led to re­gime change and the disintegration of Libya. It was both countries’ dis­regard for the warnings of Algeria that resulted in the near collapse of Mali in 2012 and the unprecedent­ed attack on the Algerian gas field of In Amenas in 2013.

When Tunisia faced the threat of jihadi groups in 2012-14, it was the Algerian Army that, at the request of the Tunisian government, lent support to the budding democracy. It was not France, which had initi­ated the push to get rid of Libyan strongman Muammar Qaddafi or the European Union. Algeria extended greater financial aid to Tunisia in 2012 than the EU.

Context matters and the Euro­pean Union gives the impression of being tone deaf. Having not much to show for its endeavours in the Israeli-Palestinian conflict, having been wrong-footed by Russia in Syria, having cheered the demise of Qaddafi, one might have thought that Europe would do all it could to help Tunisia grow democratic roots.

In no way does that suggest the European Union should not criticise Tunisia, express concern at the “democratisation” of corrup­tion or argue that the government should be bolder in its reforms. However, lobbing a grenade across the Mediterranean just before the Christmas season is hardly an act of charity. Indeed, it would ap­pear to seasoned observers to be foolhardy.

The stability of Tunisia mat­ters to the European Union. With Libya in turmoil and unlikely to be stabilised soon, a functioning state to the west is essential.

Consolidating democracy in the country will take time, healing the large regional economic and social disparities between the coast and the hinterland require patience and political skill. Creating jobs is tough but essential if younger Tunisians are going to be bothered to vote and support a democratic experi­ment that lest we forget is unique in southern rim Mediterranean countries.

The European Union seems to have lost any sense of proportion, timing of geopolitical nous. The sooner its finance ministers take Tunisia off the list, the better.

Instead of tossing unwelcome grenades across the sea, it could do worse than increase its financial support for Tunisia. This would hardly be expensive considering Tunisia’s size — a population of 11.4 million.

As he prepares to pay a state visit to Tunisia in February, French President Emmanuel Macron should consider encouraging his European peers to repair the dam­age done by a bunch of technocrats in Brussels. Such a gesture would comfort his policy of fighting jihadist terrorism across the Sahel and containing the situation in Libya, both of which lie in Tuni­sia’s deep hinterland and whose stability matters to this budding democracy.

Two lessons can be drawn from this sorry episode. Tunisia must count more on its own resources and stop pretending that being a budding democracy earns it kudos in Brussels or Washington. It no longer does. Its leaders must stop short-sighted politi­cal infighting and be much more hard-headed in de­fending the coun­try’s interests interna­tionally.