By Davide Anghileri, University of Lausanne
The EU Council adopted a revised EU list of non-cooperative jurisdictions for tax purposes during its meeting held the 12 of March.
In addition to the 5 jurisdictions that were already on the EU tax blacklist (American Samoa, Guam, Samoa, Trinidad and Tobago, and US Virgin Islands), the revised EU list now also includes the following 10 jurisdictions: Aruba, Barbados, Belize, Bermuda, Dominica, Fiji, Marshall Islands, Oman, United Arab Emirates and Vanuatu.
Those ten jurisdictions did not implement the commitments they had made to the EU by the agreed deadline.
The list, which is part of the EU’s external strategy for taxation as defined by the Council, is intended to contribute to ongoing efforts to prevent tax avoidance and promote good tax governance worldwide.
In fact, over the course of last year, the Commission assessed 92 countries based on three criteria: tax transparency, good governance, and real economic activity, as well as one indicator, the existence of a zero corporate tax rate.
The outcome of the effort of the EU is that 60 countries took action on the Commission’s concerns and, hence, over 100 harmful regimes were eliminated.
As we can see, the process is fair with improvements made visible in the list. The EU has boosted transparency by publishing countries’ commitment letters online.
Another positive element of the EU listing process is that it has created a framework for dialogue and cooperation with the EU’s international partners, to address concerns with their tax systems and discuss tax matters of mutual interest.
The screening will now be enhanced. More compulsory transparency criteria will be required and three G20 countries will be added to the next screening: Russia, Mexico, and Argentina.
EU tax blacklist countermeasures
Moreover, in terms of consequences, Member States have agreed on a set of countermeasures which they can choose to apply against countries placed on the EU tax blacklist, including increased monitoring and audits, withholding taxes, special documentation requirements, and anti-abuse provisions.
The Commission will continue to support Member States’ work to develop a more coordinated approach to sanctions for the EU list in 2019.
Also, new provisions in EU legislation prohibit EU funds from being channeled or transited through entities in countries on the tax blacklist.
The work on the EU list of non-cooperative jurisdictions is a dynamic process. The Council will continue to regularly review and update the list in the coming years, taking into consideration the evolving deadlines for jurisdictions to deliver on their commitments and the evolution of the listing criteria that the EU uses to establish the list.
Eugen Teodorovici, minister for finance of Romania said the EU listing process has been a worthwhile effort. “Since it was first adopted in late 2017, the list has proven its worth in pushing forward in a cooperative manner the EU’s agenda of improving global tax practices, fighting tax avoidance and improving good governance and transparency: more than 30 jurisdictions have already delivered on their commitment to pass tax reforms,” Teodorovici said.
Similarly, Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs called the EU tax blacklist “a true European success,” stating that the EU has improved tax transparency and fairness worldwide.
“Thanks to the listing process, dozens of countries have abolished harmful tax regimes and have come into line with international standards on transparency and fair taxation. The countries that did not comply have been blacklisted, and will have to face the consequences that this brings. We are raising the bar of good tax governance globally and cutting out the opportunities for tax abuse,” Moscovici said.
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.
Davide can be reached at [email protected].
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