The European Union (EU) plans to add three Caribbean countries to its list of uncooperative jurisdictions in tax matters.
This has been communicated in a draft decision by the Council of the European Union, which indicates that EU Finance Ministers will place Anguilla, the Bahamas, and the Turks and Caicos Islands (TCI) on the tax blacklist. Nine other countries that were on already the list will remain there.
They are American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the US Virgin Islands, and Vanuatu. Listed countries typically face reputational damage, greater scrutiny of their financial transactions and may lose access to EU funding.
Issues cited with Anguilla, Bahamas & TCI
The EU reports that Anguilla, the Bahamas, and TCI all facilitate offshore structures aimed at attracting profits without real economic substance. In addition, Anguilla still awaits a supplementary review of its tax information exchange regime.
The Bahamas has reportedly yet to implement a country-by-country reporting standard developed by the Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
The Bahamas has committed to the implementation of BEPS Action 13 so that it will either be reflected in a peer review in the autumn of 2023 or result in reporting relationships with all EU member states by an agreed deadline.
The EU claims its list aims to strengthen “tax good governance”, fair taxation and global tax transparency to tackle tax evasion and avoidance by putting pressure on countries to reform their tax regimes.
The Cayman Islands was removed from the tax list in October 2020 after reforming its regulatory framework for investment funds. This included passing almost 20 pieces of legislation in response to EU pressure, including amendments to mutual funds legislation and a new Private Funds Act.
Cayman had previously introduced economic substance legislation to meet EU demands, implemented country-by-country reporting and established new beneficial ownership reporting rules.