BRIDGETOWN - Caribbean nations named on a new blacklist released by the European Union (EU) this week are taking steps to be struck off that list of countries considered non-cooperative tax jurisdictions, although some say they were surprised at their inclusion in the first place.
On Wednesday, the EU published the list based on what it said was an “intense process of analysis and dialogue” by EU Finance Ministers, following screening by the EU Commission which over the last year assessed 92 countries based on the criteria of tax transparency, good governance and real economic activity, as well as the existence of a zero corporate tax rate.
The 15 non-cooperative tax jurisdictions included Trinidad and Tobago, and the US Virgin Islands which is said have taken no commitments since the first blacklist adopted in 2017; and Barbados, Belize, Bermuda, and Dominica which the EU said had been previously moved to the grey list following commitments, but had to be blacklisted again for not following up.
“Dozens of countries have abolished harmful tax regimes and have come into line with international standards on transparency and fair taxation. The countries that did not comply have been blacklisted, and will have to face the consequences that this brings,” said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs. “We are raising the bar of tax good governance globally and cutting out the opportunities for tax abuse.”
“The EU tax havens list is a true European success. It has had a resounding effect on tax transparency and fairness worldwide”, said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs. “Thanks to the listing process, dozens of countries have to abolish harmful tax regimes and fall in line with international standards on transparency and fair taxation The countries that did not comply have been blacklisted, and will have to face the consequences that this brings. We are raising the bar of tax good governance globally and cutting out the opportunities for tax abuse.”
The Dominica government has expressed surprise and dismay at its inclusion in the list, accusing the EU of acting “unfairly and without proper justification”.
It said the island was put on the grey list in December 2017 despite the complete devastation caused by Hurricane Maria that year.
“With our country shut down after Maria, electricity down island-wide, communications disrupted, our people homeless and in desperate need of immediate assistance, 90 per cent of homes damaged and in some instances destroyed, roads impassable, businesses shut down for an extended period, the EU gave us, in our devastated condition, no more time than any other country to comply with their demands,” it said, adding that despite the circumstances, Dominica ensured that it complied with all the legislative changes that were requested by the EU.
The government noted that one of requirements requested by the EU was that Dominica join the Convention on Mutual Administrative Assistance in Tax Matters which requires the sanction of the OECD. That would have would have allowed for the passage of the Automatic Exchange of Information Act which the EU had requested.
However, the government said that although Dominica applied since May 31, 2017 to the OECD to join that Convention, and subsequent correspondences reiterated its commitment and desire to join, “through absolutely no fault of the Government of Dominica, we have to date, not been given final clearance from the OECD or a substantive response to our application.”
It added that senior government ministers and public officers have explained these facts to EU representatives, the EU Code of Conduct Group, EU TAXUD and the EU Council on numerous occasions but to no avail.
“In February this year, we wrote to the EU requesting an extension of time to allow for a response to be obtained from the OECD to our application. Regrettably, we received no response,” it said, explaining that Dominica was subsequently blacklisted by the EU on the grounds that it does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended and has not yet resolved these issues.
“This statement of the grounds is misleading, and manifestly unfair. The only reason why Dominica “has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended ‘ is that the OECD has to date not given the go ahead to Dominica to sign on. In other words, Dominica is being penalized while it is awaiting a response, and notwithstanding there was and is nothing else it can do or could have done,” the government said.
Meantime, Bermuda’s Premier David Burt said the news of Bermuda’s inclusion on the list was a “setback”, but stressed that he expected it would be removed soon.
He later told the House of Assembly that the placement was due to a “minor technical omission in our regulations”, and despite the omission being discovered and immediately addressed, the reinsertion of an omitted line “appears not to have been good enough for the EU”.
“It is disappointing that after endless hours of crafting a regime that would meet the required test and in fact having one now in force has not been enough to prevent our addition to the EU’s list on non-cooperative tax jurisdictions,” he said at a press conference with Minister of Finance Curtis Dickinson after the list was published.
“Bermuda is compliant and we are confident that within a matter of weeks, that will be accepted by EU Member States and Bermuda will be removed from this list. This confidence is shared by the UK Government who through the Treasury specifically stated ‘that Bermuda has legislated to address the issue identified. In light of this we expect Bermuda, and other compliant jurisdictions, to be removed from the list at the next available opportunity’.”
He further sought to assure Bermudians that government did not anticipate any sanctions to be levied against the British Overseas Territory.
“We will be pressing Bermuda’s case, emphasizing 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,” Burt added.
For Barbados’ part, Minister of International Business and Industry Ronald Toppin said authorities are working towards having the island removed from the blacklist. But he stressed that Barbados’ actions remain transparent, as the country has already been deemed compliant by the Organisation for Economic Co-operation and Development (OECD), which is the globally recognized body for the setting and monitoring of international tax standards.
The EU said that a letter will be sent to all jurisdictions on the EU list, explaining the decision and what they can do to be de-listed; the European 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; and the Commission will continue the open dialogue and engagement with the jurisdictions concerned, to provide technical support and clarifications whenever needed and to discuss any tax matters of mutual concern.