European Union: EU Blacklisting Of Tax Havens

After months of screening global tax policies by the European Council's Code of Conduct Group, the EU has finalised its tax-haven blacklist –  a list of non-cooperative jurisdictions for tax purposes, which currently comprises the following 17 jurisdictions: American Samoa, Bahrain, Barbados, Grenada, Guam, Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, South Korea, Trinidad and Tobago, Tunisia and United Arab Emirates.

The list is the EU's latest initiative to crack down on aggressive tax avoidance, made more crucial by the recent Panama and Paradise paper information leak.

In addition to the blacklist, there is also a "grey list" comprising a further 47 jurisdictions, including Bermuda, Cayman Islands, Guernsey, Isle of Man and Jersey. These jurisdictions have committed to addressing the deficiencies in their tax systems by the end of 2018 (or 2019 for developing countries) and will be regularly monitored by the EU. The EU has extracted promises from most of those jurisdictions to make changes to their rules; in particular, Jersey, Guernsey, Bermuda and the Cayman Islands have apparently committed to introducing substance requirements, which appears to relate to the EU's concern that these jurisdictions "facilitate offshore structures which attract profits without real economic activity." Whilst it remains to be seen what form this commitment will take, it highlights ways in which jurisdictions on the grey list can avoid being placed on the blacklist in the future. The European Commissioner for Tax, Pierre Moscovici, has called on member states to set a precise timetable to examine the grey-listed countries' commitments in six months. 

In determining which jurisdictions were put on the black and grey lists, the European Commission produced a scoreboard under which country jurisdictions were examined against objective economic, financial, stability and tax governance indicators. Risk indicators include transparency and exchange of information, preferential tax regimes and no corporate income tax or a zero corporate tax rate. The European Commission's scoreboard was a first basis for the European Council's Code of Conduct Group to decide which jurisdictions would be relevant to screen in more detail. The European Council's Code of Conduct Group then further measured the transparency of the selected country's tax regime, their tax rates and whether their tax systems encourage multinationals to unfairly shift profits to low tax regimes to avoid higher duties in other jurisdictions. 

In order to avoid being placed on the blacklist in the future, all jurisdictions must comply with the EU fair taxation rules, and must not offer preferential measures or arrangements that enable companies to move profits to avoid levies. Companies must also implement anti-profit-shifting measures and meet the transparency standards previously set by the Organisation for Economic Co-operation and Development (the "OECD"). 

These new measures will have an impact on the conduct of anti-money laundering diligence in circumstances where entities are based in or have significant operations in blacklisted jurisdictions, and to a lesser extent the same is true for operations in jurisdictions on the grey list (that could be put on the blacklist within six to 12 months). The new measures are significant given that tax evasion is a predicate offence to money laundering under EU rules and will also be relevant to any AML risk assessment under the Fourth Anti-Money Laundering Directive. Although sanctions and other penalties have yet to be designated for blacklisted countries, certain dealings with blacklisted countries could raise both tax evasion and money laundering concerns.

The European Fund for Sustainable Development legislation includes reference to the blacklist, and the EU is due to release specific detail on any potential enforcement mechanism in the coming weeks, with one possible penalty being that blacklisted countries may no longer be eligible to receive funds from the EU (save for aid development). Member states are likely to also be encouraged to apply their own enforcement measures in order to add real teeth to being on the blacklist. 

However, some critics argue that being placed on the blacklist will have little consequence without being backed by significant sanctions or other financial penalties. Whatever enforcement regime the EU decides on for blacklisted countries, however, reputation damage and a higher level of scrutiny will be inevitable. Moscovici added that the blacklisting regime is an important step, but an "insufficient response to the scale of tax evasion worldwide."

The regime has been further criticised for its lack of transparency and questions about whether or not some countries effectively used their political and economic leverage to keep themselves off the lists, or at least off the blacklist.

Interestingly, EU Member States were not screened as potential jurisdictions to be included on the black or grey lists, and some anti-poverty and fair tax groups have heavily criticised this approach. The charity Oxfam also said the blacklist "has to include at least 35 countries, including notorious tax havens such as Switzerland and Bermuda, in order to be effective...at least four EU countries would be blacklisted if the EU were to apply its own criteria to member states."

International authorities have previously published similar blacklists, but most have struggled for credibility. The OECD's tax haven list published in June 2016 contained only Trinidad & Tobago. Meanwhile, several European jurisdictions already have blacklists, penalising specified low tax jurisdictions. However, these lists are often narrow in scope and do not include major offshore jurisdictions such as the Cayman Islands and Jersey. 

Ropes & Gray will continue to monitor developments in this area and provide updates on the regime as they are announced by the Commission.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions