European Union tax haven blacklist

The European Union tax haven blacklist, officially the EU list of non-cooperative tax jurisdictions, is a tool of the European Union (EU) that lists tax havens. It is used by the Member States to tackle external risks of tax abuse and unfair tax competition. It was adopted for the first time in 2017 as a response to tax avoidance in the EU, screening 92 countries.[1] The screening processes does not include EU countries. [2] It is managed by the Code of Conduct Group for Business Taxation and monitored by the European Commission (EC).[3] The most recent revision was released on 27 February 2020, and from 2020, the list will be updated twice a year.[4]

Criteria for listing and history

Criteria

Jurisdictions that do not comply with all three of these EC criteria are flagged as tax havens by the EU:[3]

  • Transparency
  • Fair Tax Competition
  • BEPS implementation (the OECD's Base Erosion and Profit Shifting minimum standards)

History

The original list in 2017 contained additional countries. Of these, 25 countries have been cleared and removed from the list by March 2019: Andorra, Bahrain, Faroe Islands, Greenland, Grenada, Guernsey, Hong Kong, Isle of Man, Jamaica, Jersey, Korea, Liechtenstein, Macao SAR, Malaysia, Montserrat, New Caledonia, Panama, Peru, Qatar, San Marino, Saint Vincent and the Grenadines, Taiwan, Tunisia, Turks and Caicos, and Uruguay. An additional 34 countries that have committed to compliance by the end of 2019, and form a" grey list": Albania, Anguilla, Antigua and Barbuda, Armenia, Australia, Bahamas, Bosnia and Herzegovina, Botswana, British Virgin Islands, Cabo Verde, Costa Rica, Curaçao, Cayman Islands, Cook Islands, Eswatini, Jordan, Maldives, Mauritius, Morocco, Mongolia, Montenegro, Namibia, North Macedonia, Nauru, Niue, Palau, Saint Kitts and Nevis, Saint Lucia, Serbia, Seychelles, Switzerland, Thailand, Turkey, and Vietnam.[3]

A number of countries have not yet been screened: In 2019 Russia, Mexico and Argentina are scheduled to be screened. Other countries are planned to be brought into the scope from 2020 onwards.[3]

On 27 March 2019, the European Parliament voted by 505 in favour to 63 against of accepting a new report that likened Luxembourg, Malta, Ireland and the Netherlands, and Cyprus to "display[ing] traits of a tax haven and facilitate aggressive tax planning".[5][6] However, despite this vote, the EU Commission is not obliged to include these EU jurisdictions on the blacklist.[7]

List

Current listed jurisdictions

As of 27 February 2020, there are 12 non-cooperative jurisdictions on the blacklist:[4]

Non-cooperative jurisdictions Type of jurisdiction Reasons for blacklisting
 American Samoa Unincorporated and unorganized U.S. territory American Samoa does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, did not commit to apply the BEPS minimum standards and did not commit to addressing these issues.
 Cayman Islands Autonomous British Overseas Territories Cayman Islands does not have appropriate measures in place relating to economic substance in the area of collective investment vehicles.
 Fiji Country Fiji is not a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes ("Global Forum"), has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, has harmful preferential tax regimes, has not become a member of the Inclusive Framework on BEPS or implemented OECD anti-BEPS minimum standard, and has not resolved these issues yet.
 Guam Unincorporated and organized U.S. territory Guam does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, did not commit to apply the BEPS minimum standards and did not commit to addressing these issues.
 Oman Country Oman does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, and has not resolved these issues yet.
 Palau Country Palau does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, and has not resolved these issues yet.
 Panama Country Panama does not have a rating of at least “Largely Compliant” by the Global Forum on Transparency and Exchange of Information for Tax Purposes for Exchange of Information on Request and has not resolved this issue yet.
 Samoa Country Samoa has a harmful preferential tax regime and did not commit to addressing this issue.

Furthermore, Samoa committed to comply with criterion 3.1 by the end of 2018 but has not resolved this issue yet.

 Seychelles Country Seychelles has harmful preferential tax regimes and has not resolved these issues yet.
 Trinidad and Tobago Country Trinidad and Tobago does not apply any automatic exchange of financial information, has a “Non-Compliant” rating by the Global Forum on Transparency and Exchange of Information for Tax Purposes for Exchange of Information on Request, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, has harmful preferential tax regimes, and has not resolved these issues yet.
 U.S. Virgin Islands Unincorporated and organized U.S. territory US Virgin Islands does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, has harmful preferential tax regimes, did not commit to apply the BEPS minimum standards and did not commit to addressing these issues.
 Vanuatu Country Vanuatu does not have a rating of at least “Largely Compliant” by the Global Forum on Transparency and Exchange of Information for Tax Purposes for Exchange of Information on Request, facilitates offshore structures and arrangements aimed at attracting profits without real economic substance and has not resolved these issues yet.

Sanctions

On December 16, 2019, the EU Code of Conduct Group (Business Taxation) (CCG), under the Economic and Financial Affairs Council, published a new guidance[8] on sanctions to be applied by EU Member States against blacklisted 'non-cooperative' jurisdictions by the end of 2020. These sanctions were immediately backed[9] by the Finnish Presidency of the Council of the European Union called such sanctions as "defensive-measures" that are recommended to EU Member States to take against blacklisted jurisdictions.[10]

These defensive-measures entail:[11]

  • denying deduction of costs and payments that otherwise would be deductible, when these costs and payments are treated as directed to entities or persons in blacklisted jurisdictions;
  • including in the taxpayer company's tax base the income of an entity resident or a permanent establishment situated in a blacklisted jurisdiction, in accordance with the Anti-Tax Avoidance Directive rules for controlled foreign companies;
  • applying a withholding tax at a higher rate on payments such as interest, royalties, service fee or remuneration, when these payments are treated as received in blacklisted jurisdictions; and
  • for those Member States with rules that permit excluding or deducting dividends or other profits received from foreign subsidiaries, denying or limiting these 'participation exemptions' if the dividends or other profits are treated as received from a blacklisted jurisdiction.

Member States are requested to apply at least one of these measures from 1 January 2021 at the latest. Furthermore, Member States are entitled to apply their own additional measures or to maintain their own lists of non-cooperative jurisdictions at the national level.

By the end of 2021, an overview of sanctions applied by Member States will take place, and as of 2022, the CCG will assess the need for further coordination of defensive measures.

Criticism

According to Oxfam, the 2017 EU blacklist would be properly effective only if it were extended to at least an additional 35 countries, including notorious tax havens such as Switzerland and the Cayman Islands as well as EU tax havens Ireland, Luxembourg, the Netherlands and Malta.[2] Some of these countries (most notably the Cayman Islands) have now been added.

See also

References
  • Text was copied from this source, which is © European Union, 1995–2018. Reuse is authorised, provided the source is acknowledged.
  1. Francesco Guarascio. EU shrinks tax haven blacklist, removes UK, Dutch territories. Reuters. 17 May 2019.
  2. "Effective EU tax haven blacklist must include at least 35 countries, Oxfam says". Archived from the original on November 28, 2017. Retrieved August 15, 2019.CS1 maint: BOT: original-url status unknown (link)
  3. Questions and answers on the EU list of non-cooperative tax jurisdictions. Brussels, 12 March 2019. European Commission Press Release Database.
  4. "Taxation: EU list of non-cooperative jurisdictions". European Council. Retrieved 2020-04-20.
  5. Simon Bowers (4 March 2019). "Seven EU Countries Labeled 'Tax Havens' in Parliament Report". International Consortium of Investigative Journalists. Archived from the original on 20 April 2019. Retrieved 20 April 2019.
  6. "Ireland likened to tax haven in report accepted in European Parliament". RTE News. 26 March 2019. Archived from the original on 26 March 2019. Retrieved 27 March 2019. Ireland has been likened to a tax haven in a new report which was overwhelmingly accepted by the European Parliament.
  7. "The Netherlands is a tax haven alongside Ireland, Malta, and Cyprus, say MEPs". DutchNews.nl. 27 March 2019. Archived from the original on 31 March 2019. Retrieved 20 April 2019. Members of the European Parliament have voted to include the Netherlands, Ireland, Luxembourg, Malta and Cyprus on the official EU tax haven blacklist.
  8. "Report 14114/19 from the Code of Conduct Group (Business Taxation)". Council of the European Union. December 25, 2019. Retrieved December 17, 2019.
  9. "EU to roll out sanctions against blacklisted jurisdictions". www.internationalinvestment.net. 2019-12-17. Retrieved 2019-12-18.
  10. Lintilä, Mika (December 5, 2019). "OUTCOME OF THE COUNCIL MEETING - 3736th Council meeting" (PDF). Council of the European Union. Retrieved December 18, 2019.
  11. "EU sets out sanctions against blacklisted jurisdictions | STEP". www.step.org. Retrieved 2019-12-18.
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