ECOFIN PUTS RUSSIA AND BVI ON BLACKLIST

EU building

The blacklist of tax havens continues to grow. At its meeting on 14 February, the Economic and Financial Council of the European Union (also known as Ecofin) added Russia, the British Virgin Islands, Costa Rica and the Marshall Islands to the list of non-cooperative jurisdictions for tax purposes. This brings the total number of jurisdictions on the list to 16: the four new additions join American Samoa, Anguilla, Bahamas, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, Turks and Caicos Islands, US Virgin Islands and Vanuatu.

The EU’s list of non-cooperative jurisdictions includes “countries that have not engaged in a constructive dialogue with the Union on tax governance or have not fulfilled their commitments to implement the necessary reforms”. Such reforms should aim to meet “a number of objective criteria, including tax transparency, fair taxation and the implementation of international standards to prevent base erosion and profit shifting”.

Russia was blacklisted after Ecofin found that the country had not committed to addressing the harmful aspects of a special regime for international holding companies. The tax dialogue then came to an abrupt halt following the aggression against Ukraine.

The British Virgin Islands was found to be insufficiently compliant with the OECD standard on exchange of information on request, while Costa Rica failed to fulfil its commitment to eliminate or modify harmful aspects of its foreign source income exemption regime.

The Marshall Islands was found to be deficient in its implementation of the economic substance requirements. There are concerns that a zero or nominal corporate tax rate may attract profits without any real economic activity.

At the meeting, Ecofin confirmed that Barbados, Jamaica, North Macedonia and Uruguay had met their commitments to the Union and could therefore be removed from the “grey list” shortly. Hong Kong and Malaysia were granted an extension to complete the reform of their systems for exempting foreign income and capital gains. Qatar was also granted an extension until the end of March due to constitutional constraints in completing its reform in time.

SOURCE: www.consilium.europa.eu