17 nations placed on EU blacklist of tax havens

by Davide Anghileri

The EU’s ECOFIN Council released on December 5 its long-awaited blacklist of tax havens and provided for sanctions on these governments.

The EU blacklist list includes 17 countries: American Samoa, Bahrain, Barbados, Grenada, Guam, Korea (Republic of), Macau, the Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia, and the United Arab Emirates.

The Council concluded that these countries are non-cooperative jurisdictions for tax purposes because they did not meet Council criteria established in November 2016 and did not provide a sufficient commitment to meet these criteria in the future. These EU standards concern tax transparency and fair taxation and require implementation of the minimum standards set out in the OECD/G20 base erosion profit shifting (BEPS) plan agreements.

This measure shows the effort taken by the EU in recent years to tackle tax avoidance and evasion around the world.

Country commitments

The EU agreed to not add countries to its blacklist of tax havens even if the country failed to live up to EU tax standards if the country made a sufficient commitment to change its ways. The EU said the following countries failed tax transparency standards but made sufficient commitments to improve:

Armenia, Bosnia & Herzegovina, Botswana, Cape Verde, Hong Kong SAR, Curaçao, Fiji, Former Yugoslav Republic of Macedonia, Jamaica, Georgia, Maldives, Montenegro , Morocco, New Caledonia, Oman, Peru, Qatar, Serbia, Swaziland, Taiwan, Thailand, Turkey, and Vietnam.

Some countries were not listed because they pledged to improve in the area of fair taxation. The following jurisdictions committed to amend or eliminate the existence of harmful tax regimes:

Andorra, Armenia, Aruba, Belize, Botswana, Cape Verde, Cook Islands, Curaçao, Fiji, Hong Kong SAR, Jordan, Labuan Island, Liechtenstein, Malaysia, Maldives, Mauritius, Morocco, Niue, St Vincent & Grenadines, San Marino, Seychelles, Switzerland, Taiwan, Thailand, Turkey, Uruguay, and Vietnam.

The following countries pledged to improve their substance requirements for tax purposes by abolishing tax regimes that facilitate offshore structures which attract profits without real economic activity and were thus omitted from the list:

Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey, and Vanuatu.

Countries that failed to implement the BEPS minimum standards but pledged to do and were thus omitted from the blacklist of tax havens were:

Albania, Armenia, Aruba, Bosnia and Herzegovina, Cabo Verde, Cook Islands, Faroe Islands, Fiji, Former Yugoslav Republic of Macedonia, Greenland, Grenadines, Jordan, Maldives, Montenegro, Morocco, Nauru, New Caledonia, Niue, Saint Vincent, Serbia, Swaziland, Taiwan and Vanuatu.

Caribbean tax havens?

Eight jurisdictions were not fully assessed because they were badly hit by the hurricanes in summer 2017 and were given until early 2018 to respond to the EU’s concerns. The countries omitted from consideration were Anguilla, Antigua and Barbuda, Bahamas, British Virgin Islands, Dominica, St Kitts and Nevis, Turks and Caicos, and US Virgin Islands.

The Code of Conduct Group on Business Taxation should, by February 2018, pursue further contacts with these jurisdictions, with the view to resolving concerns by the end of 2018, the Council said.

The approved document also states that the Council should amend its list blacklist of tax havens at least once each year based on a report from the Code of Conduct Group and indicate the starting date of application of that modification.

Countermeasures

The ECOFIN Council also provided some countermeasures to encourage countries placed on the blacklist of tax havens to change their behavior.

A measure at the EU level will limit access for listed jurisdictions to the European Fund for Sustainable Development. The Council said the blacklist could be incorporated into other EU legislative acts in the non-tax area in the future to reinforce the defensive measures of the Council conclusions

The Council said that Member States should adopt at least one of the following measures: reinforced monitoring of certain transactions, increased audit risks for taxpayers benefiting from the regimes at stake, or increased audit risks for taxpayers that use structures or arrangements involving these jurisdictions

The Council said countries may adopt further measures at their discretion, like non-deductibility of costs, controlled foreign company (CFC) rules, withholding tax measures, limitations on the participation exemption, a switch-over rule, a reversal of the burden of proof, special documentation requirements, or provisions requiring mandatory disclosure by tax intermediaries of specific tax schemes with respect to cross-border arrangements.

Davide Anghileri

Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.

Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues. He can be reached at danghileri@yahoo.it.

Davide Anghileri


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