EU Adds 9 Jurisdictions to Tax Haven Blacklist

On March 12, 2019, the EU Finance Ministers updated the EU list of non-cooperative tax jurisdictions.  The list now has 15 countries and is part of the EU’s fair taxation initiative.^[1]

The Commission explained that it assessed 92 countries based on three criteria:  tax transparency, good governance and real economic activity, and the existence of a zero corporate tax rate.   As a result of the assessment and pressure to avoid the blacklist, 60 countries acted and eliminated over 100 harmful regimes.

The Ministers blacklisted 15 countries.  5 have taken no commitments since the first blacklist adopted in 2017:  American Samoa, Guam, Samoa, Trinidad and Tobago, and the U.S. Virgin Islands.  3 others were on the 2017 list, but were moved into the grey list following commitments they had taken.  However. They have been blacklisted again for not following up:  Barbados, the United Arab Emirates and the Marshall Islands.

7 additional countries were moved from the grey list to the blacklist for the same reason:  Aruba, Belize, Bermuda, Fiji, Oman, Vanuatu, and Dominica.  Another 34 countries will continue to undergo monitoring in 2019 (grey list), while 25 countries from the original screening process have been cleared.^[2]

The EU members have agreed on a set of countermeasures against listed countries.  They can choose to apply them, including increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions.  The Commission will continue to support EU members’ work to develop a more coordinated approach to sanctions for the EU list in 2019.  Additionally, new provisions in EU law forbid EU funds from being channeled or transited through entities in countries on the tax blacklist.

The EU will send a letter to all jurisdictions on the EU list, explaining the decision and what they can do to be de-listed.  The Commission and Member States (Code of Conduct Group) will continue to monitor the jurisdictions that have until the end of 2019/2020 to deliver, and assess whether any other countries should be included in the EU listing process.  The Commission will continue the dialogue and engagement with the jurisdictions concerned, to provide technical support and clarifications whenever needed and to discuss any tax matters of mutual concern.^[3]

Some of the targeted countries sent letters or made press releases, protesting their listing.

Approximately one week ago pressure from the U.S., Saudi Arabia and Panama prompted EU governments last week to block another blacklist of countries that show deficiencies in countering money laundering and terrorism financing.^[4]

A criticism of the EU listing initiative is that is does not include the many EU countries with international financial services, such as Ireland, Luxembourg, the Netherlands, Cyprus, Austria, Hungary, and the U.K.  A continuing criticism is that, notwithstanding the EU’s statements of open and vigorous engagement, the targeted countries complain about ever-shifting and obscure standards and insufficient communication over the standards and the expectations from the EU.  A continuing complaint is about the overlapping standards of the EU and OECD.

The March issue of the IELR will have a more comprehensive article on the new listing, including the responses of the targeted countries.  See also EU Q & As on the list

[1]    European Commission, Fair Taxation:  EU updates list of non-cooperative tax jurisdictions, IP/19/1606, March 12, 2019.

[2]    Id.

[3]    European Commission, Fair Taxation:  EU updates list of non-cooperative tax jurisdictions, supra.

[4]    Id.