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EU Code of Conduct Group identifies 'harmful' tax jurisdictions

Thursday, 7 February, 2019

The European Union's Code of Conduct Group (Business Taxation) has warned a group of six small international financial centres that some of their tax policies are 'harmful' and must be repealed by the end of 2019.

The Code of Conduct Group (CCG) is currently preparing its recommendations to the EU Council regarding revision of its blacklist of non-cooperative jurisdictions for tax purposes. The original list was published at the end of 2017, and a new version is due to appear this year, probably in June. In the meantime, the CCG is writing to jurisdictions at risk of blacklisting, asking them to resolve the issues.

Most of these issues are now related to so-called preferential tax measures, rather than the original concerns about tax transparency. As a result, most international financial centres (IFCs) rushed to amend their rules on preferential treatment by the end of 2018. Only a few remain non-compliant in the CCG's view.

The six IFCs at risk are Barbados, Belize, CuraƧao, Mauritius, Saint Lucia and Seychelles. The CCG has written to each, asking them to make a high-level commitment to abolish or amend the relevant preferential regimes, without introducing any grandfathering mechanisms to water down the impact on non-resident businesses, according to international tax firm EY. Some of them have already announced extensive revisions of their corporate tax regimes to meet the EU's demands, but have included some grandfathering provisions.

The CCG's letters suggest that it will consider recommending the jurisdictions for inclusion on the EU's soon-to-be-revised list of non-cooperative jurisdictions for tax purposes, if the measures are not removed.

Sources