EU blacklist: Good news – but questions remain
JERSEY has not been added to the EU’s tax haven ‘blacklist’ but has been asked to address certain issues relating to its tax regime by next year.
Following months of discussions, EU finance ministers agreed on a new list of non-cooperative jurisdictions yesterday, members of which could face sanctions including fines and trade restrictions.
Being blacklisted would also carry a reputational risk and possibly discourage inward investment. Jersey and Guernsey were among 92 jurisdictions that were being considered for addition to the list by the EU Code of Conduct Group for taxation.
The 17 countries which have been added to the final list are American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and the United Arab Emirates.
A further confidential ‘grey list’ of jurisdictions is also believed to have been created.
In response to the news, Chief Minister Ian Gorst said the decision not to blacklist Jersey reflected its ‘commitment to the highest standards of tax transparency and information exchange’.
‘We co-operated fully with the Code Group throughout the screening process, and have actively pursued a good-neighbour policy in our relations with the EU,’ he said.
‘These positive interactions have borne fruit. I have every confidence that the Island will continue to be an international financial services centre of choice, working as a partner with the EU and other global organisations to meet the highest regulatory standards.’
Both Jersey and Guernsey have been asked, however, to address concerns that the EU has about the ‘economic substance’ of companies within their jurisdiction. This calls into question whether businesses registered in the islands for tax purposes are actually carrying out any real business activities there.
A statement released by the External Relations Department said: ‘In order to secure its continued status as a co-operative jurisdiction, Jersey has made a written commitment to address concerns identified by the Code of Conduct Group by the end of next year.
‘These concerns specifically relate to a perceived lack of legal substance requirements that could lead to profits being registered in Jersey that do not demonstrate real economic activity.’
Senator Gorst added that the Island was committed to working with the Code Group on this issue.
‘I look forward to entering into substantive dialogue in the new year,’ he said
‘Our discussions may include creating enhanced reporting obligations or changes to our legislation on economic substance.’
The Chief Minister suggested last month that new legislation to address the matter of economic substance was being considered.
Fair taxation campaigners have heavily criticised the EU, suggesting that the compilation of the blacklist was politically motivated.
‘The EU has today missed a great opportunity to tackle the real issues lying behind the large-scale tax avoidance and tax evasion that is bleeding EU countries dry,’ said Alex Cobham of the Tax Justice Network.
‘Rather than have a list of tax havens based on an objective set of criteria, as originally envisaged, the list appears to be a political fix, with EU members picking their least favourite countries to name and shame.
‘The result of the flawed blacklisting process is a politically led list that includes only the economically weak and politically unconnected.’