Global compliance crackdown continues as EU blacklist forces tax haven reforms

global compliance crackdown

3rd June 2019

Reading through our blogs, you’ll notice a recurring message: international tax is getting stricter. For the last few years, authorities worldwide have been driving a global compliance crackdown in order to punish fraudulent behaviour. One body that has consistently taken action in this regard is the EU, whether it be through its member states, or with its tax haven blacklist, the bloc has forced many countries to toughen up on tax. In fact, towards the end of May, the EU removed three longstanding tax havens from its blacklist for enacting reforms to bring them in line with international standards. Recruiters placing contractors abroad should be aware that the amount of countries enacting stricter tax laws is constantly increasing, and that they should be making compliance a top priority. So, what do recruiters need to know?

Global compliance crackdown: Blacklist removals

Last month, the EU removed Bermuda, Aruba and Barbados from its blacklist of tax havens. The three islands were added to the list in March as they had repeatedly failed to change their tax system after numerous warnings. This led to the EU accusing the destinations of facilitating evasion in other countries. After the changes, Aruba has been completely removed from the list, while Bermuda and Barbados have made commitments to address EU concerns and have been moved to a ‘grey list’ of countries that are still under scrutiny. However, the move hasn’t come without criticism, and Chiara Putaturo, inequality and tax policy advisor of Oxfam, claimed that “the reforms agreed by Bermuda, Barbados and Aruba will not stop them operating as tax havens’’, and called for the EU to blacklist all jurisdictions that offer very low or zero corporate tax rates. Major jurisdictions still on the EU list include the United Arab Emirates, Oman, U.S. Virgin Islands, Belize, Fiji, the Marshall Islands, Vanuatu, Dominica, Samoa and Trinidad and Tobago.

The blacklist

This initiative, started back in December 2017, has been extremely useful as part of the global compliance crackdown, pressuring numerous countries to change their tax systems. In addition to the blacklist, the ‘grey list’ of nearly 50 countries that have committed to making reforms has also been effective. For example, in December 2018, the Cayman Islands published three new bills in an attempt to stay off the blacklist. Liechtenstein also ended long-standing damaging tax practices in direct response to being ‘grey listed’. The EU hopes that these measures will halt the loss of funds which it estimates to be around £506 billion each year. In addition to this, there are a raft of other international treaties that have been effective in prompting countries to tighten up on tax compliance. For example, the Common Reporting Standard (CRS), the OECD’s information standard for the automatic exchange of financial information between countries, has seen widespread adoption throughout the international community with 96% of authorities that have committed to the CRS already passing the required domestic laws to implement it.

Recruiters need to be careful

As authorities continue to proceed with this global compliance crackdown, it’s clear that the legal landscape when placing contractors abroad has become even more complex – and will only continue to do so. Recruiters cannot afford to be complacent when it comes to international compliance, and with the introduction of legislation such as the Criminal Finance Act, firms can now be held fully liable for non-compliant behaviour of anyone associated with the company, even contractors. However, this shouldn’t stop you doing business abroad, and by investing in an expert contractor management service, you can rest assured that any risk is managed for you, allowing you and your team to focus on the job at hand.

Contact our expert team today:


Follow our LinkedIn page

Follow us on Twitter

Get in touch on Facebook

Contact Us