The EU council has added another four countries to its tax haven blacklist.
Cayman Islands, Palau, Panama and Seychelles have all landed on the EU list of non-cooperative jurisdictions for tax purposes.
There are now 12 jurisdictions on the list, which includes; Fiji, Oman, Samoa, Trinidad and Tobago, Vanuatu and the three US territories of American Samoa, Guam, and the US Virgin Islands.
The list includes “jurisdictions that have either not engaged in a constructive dialogue with the EU on tax governance or failed to deliver on their commitments to implement reforms to comply with the EU’s criteria on time”.
Reasons for blacklisting
An EU document said that the Cayman Islands “does not have appropriate measures in place relating to economic substance in the area of collective investment vehicles”.
Cayman was placed on the greylist in 2017.
Meanwhile, Panama does not have a rating of at least “largely compliant” from the Global Forum on Transparency and Exchange of Information for Tax Purposes and “has not resolved this issue yet”.
The cental American country was placed on the greylist in July 2019.
“The work on the list of non-cooperative tax jurisdictions is based on a thorough process of assessment, monitoring and dialogue with about 70 third country jurisdictions,” said Zdravko Marić, Croatian deputy prime minister and minister of finance.
“Since we started this exercise, 49 countries have implemented the necessary tax reforms to comply with the EU’s criteria.
“This is an undeniable success.
“But it is also work in progress and a dynamic process where our methodology and criteria are constantly reviewed.”
Stay of execution
Turkey has been given extra time to comply with the EU standards before being placed on Annex I, also known as the blacklist.
The country failed to carry out automatic transfers of tax information with all EU states.
It was granted more time to fulfil its commitments, because it has adopted legislative changes to allow data sharing,
The document said: “Given that Turkey has internal legislation in place enabling automatic exchange of information and that it notified all EU member states, with the exception of Cyprus, to OECD [Organisation for Economic Co-operation and Development], it should be given more time to solve all open issues for the automatic exchange of information to be implemented effectively with all EU member states.
If Turkey fails to put the necessary arrangements in place, “it should be included in Annex I in the subsequent update”.
Any changes in the situation of individual jurisdictions or changes to the methodology will be done at the next revision, which is planned for October 2020.
Promoting better practice
The blacklisting process was first established in December 2017 and is based on a “continuous and dynamic process” of:
- Establishing criteria in line with international tax standards;
- Screening countries against these criteria;
- Engaging with countries which do not comply;
- Listing and de-listing countries as they commit or take action to comply; and
- Monitoring developments to ensure jurisdictions do not backtrack on previous reforms.
Jurisdictions that do not comply with all international tax standards but are committed to reform are considered cooperative and included in a ‘state of play’ document called Annex II, also known as the greylist.
The EU council’s code of conduct group on business taxation monitors jurisdictions to ensure they “enact the necessary reforms by the agreed deadlines”.
Once a jurisdiction meets all its commitments, it is removed from Annex II.
Some 16 have managed to implement all the necessary reforms to comply with the EU tax good governance principles ahead of the agreed deadline and have been removed from Annex II.
These include Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts & Nevis, and Vietnam.
