The European Union (EU) has stated the reasons Saint Lucia and 16 countries have ended up on its list of “non-cooperative tax jurisdictions for tax purposes”.
The list was officially approved and published on Dec. 5, 2017 with the aim of promoting good governance worldwide, in order to maximise efforts to prevent tax fraud and tax evasion, the EU said in a press release today, Dec. 6.
Barbados, Grenada, and Trinidad and Tobago are the other Caribbean countries that made the list which also includes Panama, United Arab Emirates, and South Korea.
According to the EU, Saint Lucia was blacklisted because it “has harmful preferential tax regimes, does not apply the BEPS (base erosion and profit shifting) minimum standards and did not clearly commit to addressing these issues by 31 December 2018”.
In the case of Barbados, the EU said that country too “has a harmful preferential tax regime and did not clearly commit to amending or abolishing it as requested by 31 December 2018. Barbados’ commitment to amend or abolish other harmful tax regimes in line with criterion 2.1 will be monitored.”
The EU said “Grenada has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended and did not clearly commit to addressing these issues by 31 December 2018. Grenada’s commitment to comply with criteria 1.1, 2.1 and 3 will be monitored.”
Trinidad and Tobago ended up on the list because it “has been attributed a rating of “Non Compliant” by the Global Forum on Transparency and Exchange of Information for Tax Purposes, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters as amended, has a harmful preferential tax regime and did not commit to addressing these issues by 31 December 2018. Trinidad and Tobago’s commitment to comply with criteria 1.1 and 3 will be monitored.”
Some St. Lucians have expressed surprise via social media that some countries, particularly Dominica, have not made the list. However, the EU said the process was “temporarily” put on hold for countries affected by natural disasters, particularly the hurricanes during 2017.
However, the European body said countries are still expected to “address the concerns identified as soon as the situation improves, with a view to resolving them by the end of 2018”.
“By February 2018, they will be contacted to prepare the next steps,” it said.
The EU also stated in the press release that its list was established following a screening and a dialogue conducted during 2017 with a large number of third-country jurisdictions.
The EU added that countries that appear on the list, including Saint Lucia, failed to take “meaningful action” to address deficiencies identified and did not engage in a meaningful dialogue on the basis of the EU’s criteria.
“They made no such commitment at a high political level in time for the Council meeting,” the EU stated.
The BBC reported that a “watchlist” of 47 countries promising to change their tax rules to meet EU standards has also been issued. The “grey list” includes several with UK links, including Hong Kong, Jersey, Bermuda and the Cayman Islands, as well as Switzerland and Turkey.
Below are excerpts from the EU press release:
Work on the list started in July 2016 within the Council’s working group responsible for implementing an EU code of conduct on business taxation, in coordination with its high-level working party for taxation.
During 2017 the working group, supported by the Council’s secretariat, oversaw the screening, a technical dialogue with the jurisdictions concerned and an analysis of their tax systems. The Commission provided technical support to the process. This enabled the situation in those jurisdictions to be assessed against the EU’s criteria.
In October 2017 letters were sent to all jurisdictions concerned, informing them of the outcome of the work. Where necessary, a political commitment was requested within a specified timeframe to addressing all deficiencies identified.
Most jurisdictions chose to engage with the EU process through a constructive dialogue, and to take steps towards resolving issues identified. They have submitted in writing a firm political commitment as requested. Progress made on those commitments will be monitored as set out in the Council’s conclusions.
The jurisdictions that appear on the list are strongly encouraged to make the changes requested of them. Their tax legislation, policies and administrative practices result or may result in a loss of revenues for the EU’s member states.
Pending such changes, the EU and the member states could apply defensive measures. Including both taxation measures and measures outside the field of taxation, these measures would be aimed at preventing the erosion of the EU member states’ tax bases.