Growing criticism about EU’s tax list, which some cite as ‘international bullyism’

The European Council has added Dominica to its blacklist of non-cooperative jurisdictions in tax matters whilst putting Jamaica on its greylist last Monday (February 22).

In addition, the European Council has removed Barbados from the list of non-cooperative jurisdictions in tax matters. In justifying the addition of Dominica to its controversial blacklist, the European Council says this was done because the Caribbean territory only received a ‘partially compliant’ rating regarding its tax information exchange arrangements.

In addition, Dominica has not yet resolved this issue of partial compliance. In order not to be added to this blacklist, the European Council requires that jurisdictions are at least ‘largely compliant’ with the international standard on transparency and exchange of tax information on request.

Jamaica has been added to the European Council’s greylist, as it has committed to amend or abolish a harmful tax regime related to its special economic zone by the end of 2022. The greylist or state-of-play document comprises jurisdictions, which do not yet comply with all international tax standards but which have made sufficient commitments to implement tax good governance principles.

Barbados has since been added to this list, having been removed from the blacklist, where it was added in October 2020. Barbados was added to the blacklist list after it received a ‘partially compliant’ rating from the Global Forum on Transparency and Exchange of Information for Tax Purposes.

However, the Mia Mottley administration has since applied for and was granted a supplementary review of its tax information exchange regime by the Global Forum. As such, Barbados will therefore be grey-listed pending the outcome of this review.

Countries removed from greylist

The European Council has removed Morocco, Namibia and St. Lucia from the greylist document last Monday as they have fulfilled all their commitments. At the same time, Australia and Jordan have been granted an extension to the deadline for fulfilling their commitments, as the assessment of their reforms by the Organization for Economic Co-operation and Development (OECD) Forum on Harmful Tax Practices is pending.

The Maldives has been given four additional months to ratify the OECD Multilateral Convention on Mutual Administrative Assistance. In the meantime, there is growing criticism worldwide about the European Council’s tax blacklisting.

Remedying growing concerns about its black- and greylisting

Given the ongoing criticism, the European sought to remedy some of the concerns by the European Parliament passing a resolution last month, demanding an extension of the tax list criteria to specifically target zero tax jurisdictions. European Union (EU) parliamentarians argued that any tax haven blacklist that does not include offshore centres like the Cayman Islands was insufficient.

The resolution called into question the listing and de-listing process, arguing that it was biased because the “most harmful” jurisdictions like Cayman and Bermuda were de-listed after they had introduced “very minimal substance criteria and weak enforcement measures”.

At the same, the EU Parliament demanded the inclusion of EU member states that exhibit tax haven characteristics. Barbados-based economist, Marla Dukharan is among those harshly critical of the EU’s black- and greylisting process.

Last year, she launched a stinging broadside against the EU, describing its black- and greylisting process as “institutionalised racism and bullying. Dukharan argued that the EU, “weaponises its rules by arbitrarily, unilaterally, selectively and disproportionally imposing them on certain hapless non-EU members”.

Following the latest update of its blacklist, 12 jurisdictions remain on the list. They are American Samoa, Anguilla, Dominica, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.

The addition of Dominica to the blacklist is expected to ignite the argument that the tax blacklist predominantly targets small island nations in the Caribbean and the Pacific, which have no relevant financial services sectors.