European council blacklist expansion adds another ten countries to list of tax havens

European council blacklist expansion

29th March 2019

Regular readers of our blog may have already noticed that a common thread is the notion that international tax and compliance is becoming far more complex for contractors. The global movement of countries working together to create tougher, more interconnected tax systems is continuing at a rapid pace, with international bodies working in harmony to tighten up legislation and collect lost funds. The latest step in this movement has come from the EU, where a European Council blacklist expansion has led to finance ministers adding another ten countries to a blacklist of alleged tax havens, including contractor hotspots such as the United Arab Emirates. Contractors need to be aware of these latest developments as the pressure being applied is not limited to tax havens and will likely affect anywhere they choose to work. So, what’s the latest?

European council blacklist expansion

Last week, the EU decided to triple its list of non-cooperative tax jurisdictions to 15 countries. The European council blacklist expansion means that the list has now been expanded to include nations such as: Aruba, Barbados, Belize, Bermuda, Dominica, Fiji, the Marshall Islands, Oman, the United Arab Emirates, and Vanuatu. According to officials, these jurisdictions have been placed on the blacklist as they did not implement commitments made to the EU regarding their tax regimes within the agreed deadlines.

At its inception in 2017, the blacklist contained 17 jurisdictions. Since then, the EU has actively been moving many to its ‘grey list’ of countries that are reforming their tax policies. The last revision, in November 2018, left just five countries on the blacklist: American Samoa, Guam, Samoa, Trinidad and Tobago, and the US Virgin Islands.

However, the inactivity of many of the those intending to make reforms has seen them moved back to the blacklist. For instance, Barbados, the Marshall Islands, and the United Arab Emirates were all moved to the grey list after making commitments to improve their tax systems, but have now found themselves back on the blacklist. Other nations such as Aruba, Belize, Bermuda, Dominica, Fiji, Oman, and Vanuatu were not on the original blacklist, but have been moved from the grey to the black list for similar reasons.

Is it effective?

A popular question surrounding the use of this criteria, and the latest European council blacklist expansion is: are they effective or not? The resounding answer to this is that, in most cases, they are. The creation of the ‘grey list’, which has now grown to 34 countries, has been especially successful in encouraging countries to change tax laws. Most recently, Liechtenstein ended damaging tax practices in direct response to being ‘grey listed’.  In addition to this, there is a raft of international treaties that have been effective in prompting countries to tighten up their compliance. For instance, the Common Reporting Standard (CRS) – the OECD’s information standard for the automatic exchange of financial information between countries – has seen widespread adoption. In fact, 96% of global authorities that have committed to CRS have passed the required domestic laws to implement it, and 91% have put in place the requisite IT systems.

Eugen Toedorovici, the minister of finance of Romania, which currently holds the Council presidency, described the efficacy of these measure after the European Council  blacklist expansion, stating that ‘since it was first adopted in late 2017, the blacklist has proven its worth in promoting the EU’s agenda of improving global tax practices, fighting tax avoidance, and improving good governance and transparency: more than 30 jurisdictions have already delivered on their commitment to pass reforms.’

Contractors need to be aware

For contractors, this latest news demonstrates something that we’ve long stressed –the world of international tax and compliance is becoming increasingly complex, and getting it right is more important than ever. As authorities worldwide continue to introduce new legislation and penalties in order to clampdown on wrong-doing, those looking to work abroad shouldn’t miss out on the opportunity due to the headache of international tax compliance, or even worse, be punished for inadvertently breaking the law. Therefore, in order to minimise risks and ensure you are operating compliantly, we recommend seeking out the assistance of experts in the field. This will not only help to put your mind at ease, but also let you focus on the job at hand.

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