In March, the European Union expanded its list of blacklisted tax havens. In the updated list, the number of jurisdictions on the blacklist tripled. New additions to the list include the Dutch and British overseas territories and the United Arab Emirates.
The Original List
The EU originally created the blacklist of tax havens in December 2017. This came after it was uncovered just how widespread the tax avoidance schemes by high-net-worth individuals and corporations were.
The original blacklist already had three U.S. territories: the U.S. Virgin Islands, American Samoa, and Guam. It also included Trinidad and Tobago and Samoa. The idea is that any state on the tax haven blacklist has to deal with stricter controls on any transactions with the EU. They also face damage to their reputation. So far, the EU states still have not agreed on any sanctions.
The Expanded List
The changes in March 2019 to the tax haven blacklist included the addition of 10 more jurisdictions. These include Dominica, Vanuatu, the United Arab Emirates, Oman, the Marshall Islands, Fiji, Bermuda (a British overseas territory), Belize, Barbados, and Aruba (the Dutch Caribbean Island).
Why Countries Are Included
The decision to add a country to the European Union’s tax haven blacklist is not taken lightly. For jurisdictions to be added, they must have gaps within their tax rules that could allow tax evasion. Countries can be removed from the list if they commit to changes by the deadline that the EU sets.
To prove that the process of removing jurisdictions from the list does occur, consider that the blacklist originally included 17 states. By the time of the recent expansion, it was down to just five as most of the states on the original list committed to changing tax rules.
Opinions on the List and Expansion
Unsurprisingly, the jurisdictions recently added to the tax haven blacklist disagree with their inclusion. David Burt, the Premier of Bermuda, released a statement that the island complies with all EU standards and therefore fears no reputational damage.
The United Arab Emirates indicated regret for the EU’s decision. It also informed reporters that the jurisdictions shared a detailed plan of action with the block, outlining the actions it is currently taking. Representatives feel that the UAE should not have been included due to its close cooperation with the EU with regard to the tax haven issue as well as its ongoing efforts to meet the EU requirements related to this initiative.
Those in favor of the list, including EU tax commissioner Pierre Moscovici, say that it has pushed countries to eliminate their “harmful tax regimes.”
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