On Tuesday 18 February, the European Finance Ministers adopted their second major update of the European ‘black’ list of non-cooperative jurisdictions in terms of taxation. Four new territories are being added: the Cayman Islands, Palau, Panama and the Seychelles (see EUROPE 12425/8).
None of the eight countries currently on the ‘black’ list (American Samoa, Fiji, Guam, Oman, Trinidad and Tobago, the US Virgin Islands, and Vanuatu) have been removed, bringing the total number of jurisdictions to twelve.
Of the four new entrants, Panama is the only one not currently on the ‘grey’ list, a European source explained. Having been removed from the ‘black’ list in January 2018 (see EUROPE 11939/10) and from the ‘grey’ list in March 2019 (see EUROPE 12212/5), Panama is returning directly to the ‘black’ list after being judged not to be in line with global transparency standards by the Global Forum on Transparency and Exchange of Information for Tax Purposes of the OECD in 2019.
The Seychelles was added because of the continuation of its harmful preferential tax regimes, and Palau was added due to its lack of automatic exchange of financial information.
The European Finance Ministers also removed sixteen jurisdictions (Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts and Nevis, Vietnam) from the ‘grey’ list of countries that have made commitments.
The addition of the Cayman Islands, a “signal” sent to the United Kingdom?
The addition of the Cayman Islands to the ‘black’ list was widely seen as a message to the United Kingdom. The British territory was placed on the ‘grey’ list (see EUROPE 11919/1) in 2017, but has still not adopted adequate legislation to address EU concerns about the establishment of offshore structures.
“The UK would be well advised to take note that EU finance ministers have placed a British overseas territory on the ‘black’ list of tax havens. This sends a clear signal that the idea of turning the UK into a tax haven will not be acceptable to the EU. If the British government intends to do so, there is a good chance it will end up on the EU’s ‘black’ list as well”, said MEP Markus Ferber (EPP, Germany) in a statement.
For its part, the government of the Cayman Islands indicated in a communiqué sent immediately after the adoption of the list that it had already contacted European officials to “begin the delisting process [...] as soon as possible”, that is to say as soon as the next update, which is scheduled for October.
One-year reprieve for Turkey
In addition, twelve ‘grey’ list jurisdictions have been granted extensions to allow them time to adopt the necessary reforms to meet their commitments. “In most cases, these extensions concern developing countries without financial centres, which have already made significant progress in implementing their commitments”, the EU Council said in its communiqué.
This is particularly the case of Turkey, whose situation has made life difficult for the Member States (see EUROPE 12424/16). The country should have been placed on the ‘black’ list because, although it has implemented an automatic exchange of information on bank accounts as promised, it has omitted certain EU countries from the exchange, notably those with the largest number of Turkish nationals - namely Austria, Belgium, France, Germany, the Netherlands, Bulgaria, Romania and Cyprus - for political reasons.
After bilateral discussions, Turkey was finally kept on the ‘grey’ list in order to avoid further tensions with Ankara. The EU Council conclusions state that “given that Turkey has internal legislation in place enabling the automatic exchange of information and that it notified all EU Member States, with the exception of Cyprus, to OECD, it should be given more time to solve all open issues for the automatic exchange of information to be implemented effectively with all EU Member States”.
The text gives it until 31 December 2020 - an extension that was finally accepted by Germany, despite its reservations, in a declaration supported by Austria.
“If Turkey does not put arrangements in place for the effective implementation of the automatic exchange of information with all EU Member States, it should be included in Annex I [the ‘black’ list] in the subsequent update”, the conclusions state.
In a statement, the organisation Oxfam has once again called into question the credibility of the process, which continues to spare EU tax havens. These words echo a statement the day before by Polish Finance Minister Tadeusz Kościński (see EUROPE 12427/28).
Responding to this criticism at a press conference, European Commission Vice-President Valdis Dombrovskis assured that “all EU Member States comply with the screening criteria”.
“Actually, EU Member States are bound by EU legislation to go even further as regards good tax governance than the international standards require. So, in a sense, we are not asking any third country to do any more than what EU Member States have done themselves in terms of respecting good tax governance standards”, he added.
See the conclusions adopted: https://bit.ly/37Eftg6 (Original version in French by Marion Fontana)