The European Union (EU) updated its “black list” of tax havens on Monday. There are few changes: the island of Barbados has been removed and, in return, another Caribbean area, Dominica, has been entered. After all, there are still 12 foreign jurisdictions – American Samoa, Anguilla, Dominica, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the US Virgin Islands, Vanuatu, and the Seychelles.
The European Socialists, the second largest group in the European Parliament, again criticize the way in which the review process took place and regret that the list “covers only 2% of the money hidden in tax havens” and that “again” remains the ” worst offenders’, including European territories (this tool only lists third countries).
The “black list” brings together the jurisdictions that the European Union does not consider cooperative in the exchange of financial and tax information, or countries with abusive practices that do not adhere to the “principles of good financial management” as criteria for tax transparency or the application of OECD Minimum standards to combat tax base erosion and profit transfer.
In addition to this first list, there is a second analysis grid in which the areas are listed which, despite not fulfilling all criteria, have committed to reforms in order to improve their international ratings. This second list includes Australia, Barbados, Botswana, Jamaica, Jordan, Maldives, Swaziland, Thailand, and Turkey.
The areas of highest risk are subject to regular assessments. Therefore, a country can be excluded from any list if it undertakes to improve its tax system or takes steps to meet (or if you do not) meet the agreed cooperation criteria).
Regarding the “black list”, the EU Council justifies the departure from Barbados and the entry into Dominica on the basis of the “recently published classifications by the OECD Global Forum on Transparency and Information Exchange” in relation to the so-called “exchange of information” information on request “(when one state asks another for information about a taxpayer).
Because jurisdictions are required to have a minimum rating of “largely compliant” and Dominica “has not yet resolved this issue”, this area has become part of the “black list”. Barbados, on the other hand, was placed on the “gray list” because it had already received a “partially compliant” rating from the OECD Global Forum, and while a new evaluation is taking place, the EU has decided to keep the country in the second group.
From the second list, the 27 member states decided to withdraw Morocco, Namibia and St. Lucia “for the fulfillment of all their obligations” for improvement.
Jamaica escaped the “black list” and was added to the “gray” list after pledging to “change or abolish” its harmful tax system by the end of 2022.
Australia and Jordan, whose tax situation has also been assessed by the services of the Directorate-General for Taxation and Customs Union of the European Commission and reserved by the Member States, have an “extension of the deadline” to fulfill their obligations until the OECD Assessment of Harmful Tax Practices completed.
The Maldives were given another four months to ratify the OECD Multilateral Convention on Mutual Administrative Assistance.
Combating profit transfer
In January, Parliament passed a resolution recommending that governments apply “stricter” criteria to include not only non-cooperating or non-transparent countries, but also those that are already sharing information and continuing to damage states’ tax revenues. Member states by allowing an IRC of 0% or a very low tax rate.
MEP Aurore Lalucq, spokesman for European Socialists on Taxation, noted that of the 12 jurisdictions, all are small areas, 11 of which are small “tropical islands” while “not a big country, not a rich country, not an EU country” covered by this instrument which only brings together third countries to form the Union.
“Although Australia has failed to meet its rather obscure obligations to abolish its harmful tax system, it has managed to escape with an extension,” said the French MEP in a statement published by European socialists.
In the January resolution, MEPs called on the Commission and Member States to include minimum taxation for the IRC as a criterion.
MEPs had already expressed doubts about the “impartiality of the decision-making process” of the Member States after the Cayman Islands were excluded from the “black list”. This area, they wrote in the same resolution, has an “obvious history of promotion” tax base erosion and profit transfer “and was excluded after” very minimal material criteria “were put in place and” inadequate enforcement measures “were taken, which they said “The trust of the citizens can be undermined” if they call for “stricter regulations” in tax havens.