EU expands blacklist of 'uncooperative' countries
The original list of five countries was published in December 2017, based on criteria of tax transparency and fairness developed by the EU's Code of Conduct (Business Taxation) Group (CCG). Member States' finance ministers this week approved the addition of another ten jurisdictions to the blacklist. They are Aruba, Barbados, Belize, Bermuda, Dominica, Fiji, the Marshall Islands, Oman, the United Arab Emirates (UAE) and Vanuatu.
Bermuda is a controversial new entry. Like other major international financial centres, Bermuda enacted legislation at the end of 2018 to satisfy the CCG’s demands for 'economic substance'. This criterion requires each jurisdiction to ensure that companies claiming tax residence there conducts significant real activity inside the jurisdiction. However, Bermuda's economic substance legislation was considered inadequate by the European Commission, which conducted press briefings claiming the Bermudan government was 'playing games' with the CCG.
Bermuda duly amended its legislation in February to satisfy the CCG's requirements, but not in time to avoid being blacklisted. It believes that, with the UK's support, it will be de-listed at the EU ministers' next meeting in May.
Bermuda Premier David Burt said of the listing: ‘I wish to assure the people of Bermuda that we do not anticipate any sanctions to be levied against us and this will in no way affect how we travel or otherwise interact with the EU. Let me also state that we will be pressing Bermuda’s case, emphasising that fairness must be the order of the day. Our industry partners have commented on the paradox of our regulations being stricter than some of those countries that have not been listed. I believe that between now and May, a fair assessment of Bermuda’s legislation will confirm our compliance and we will be removed from the List.’
The UAE’s state news agency reported that the country is also disappointed with its inclusion on the list, saying: ‘This inclusion was made despite the UAE’s close cooperation with the EU on this issue and ongoing efforts to fulfil all the EU’s requirements. The UAE remains firmly committed to its long-standing policy of meeting the highest international standards on taxation, including the OECD’s requirements, and will continue to update its domestic legislative framework in this regard.’
Other financial centres expressed their relief at not being listed. BVI Finance Chief Executive Elise Donovan said: ‘We have always had substance and will take steps to add further substance following the passage of the Economic Substance (Companies and Limited Partnerships) Act 2018. In the meantime, the Premier of the BVI has already instructed officials to continue positive engagement and discussions with EU officials to ensure additional technical issues are addressed as soon as possible, to ensure our status as a leading compliant financial centre is duly recognised'.
Guernsey's Chief Minister, Gavin St Pier, said he was confident that any objective process would produce this outcome. 'We have consistently maintained as a matter of fact, that we are a jurisdiction of substance...I hope that it is now clear to EU Member States that they can have confidence in the work of the CCG and consequently there is no further role for national blacklists, the basis of which are often arbitrary and prepared without any dialogue.’?
Jersey's External Relations Minister, Ian Gorst, commented: 'Jersey has consistently maintained that we are a jurisdiction of substance, and we have worked quickly and effectively to introduce economic substance legislation. We will continue to work proactively with the CCG, as part of our commitment to meeting global standards on financial services regulation and to further our good neighbour policy with the EU.'
Bahamas Deputy Prime Minister and Minister of Finance Peter Turnquest said the country now needed to exploit its favourable outcome by re-launching the financial sector to focus on 'high-margin, value-added business with physical presence and local management and control', and away from 'volume' business represented by international business company incorporations and number of bank accounts. However, he warned that the EU will constantly be monitoring the jurisdiction for compliance.
The content displayed here is subject to our disclaimer. Read more