France releases tax cooperation black list

The French government has published
a black list of countries that are deemed uncooperative in tax matters.

The list, signed by French
ministers Christine Lagarde and Eric Woerth, comprises 18 countries that have
not met the OECD criteria of having concluded a minimum of 12 tax information
exchange agreements.

The list is part of a bill that is
designed to make investment by individuals and companies in “tax havens” less
attractive, by imposing a higher than usual tax burden on passive income from
black-listed countries.

Instead of the usual withholding
tax of 0 to 33 per cent, France will apply a tax rate of 50 per cent on
dividends, interest and royalties for entities domiciled in uncooperative
states.

In addition France has abolished
the tax deductibility of certain charges on transactions with non-cooperative
states and restricted the tax exemption of dividend payments from subsidiaries
of French companies domiciled in these locations.

The French is list based on the
OECD grey list, which features 23 countries, but excluded five countries that
have negotiated tax information exchange agreements with France.

Seven of the 18 non-cooperative
states are Caribbean countries, including Anguilla, Dominica, Grenada,
Montserrat, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines.
Four countries, Belize, Costa Rica, Guatemala and Panama, are from Central
America.

St. Kitts and Nevis Prime Minister
Denzil Douglas feels that France has acted prematurely and “out of turn” as the
OECD had given countries placed on its grey list until March 2010 to conclude
at least 12 TIEAs.

St. Kitts-Nevis is still three
agreements short of the required 12 but has initialled nine agreements which
yet have to be signed.

Mr. Douglas said that his
government was “told that we would have to wait until these OECD countries
carried out their internal bureaucratic processes before we could be given a
date or a venue for signature.”

“We were able to sign 8 of these
agreements by the end of 2009,” he said, stating that it was extremely unfair
“to now be penalised by France for not meeting the required standard of 12
signed tax agreements as we sit and wait for OECD member countries to inform us
that they are ready to sign these agreements.”

Grenada’s Finance Minister Nazim
Burke in turn believes that his country’s inclusion is simply the case of a
bureaucratic mistake, as Grenada has just finished negotiations with France
over a TIEA that is going to be signed in the near future.

 France together with Germany had pressed for
the publication of the original OECD “grey list” at the G20 meeting in April
2009 in London.

Germany in September 2010 announced
the publication of its own list of uncooperative countries in connection with a
new anti tax evasion law that came into force last year.

Unlike the French legislation the
German law targets countries that have not yet committed to tax information
exchange.

However, even the countries that
are on the OECD grey list have made this commitment.

As a result, Germany’s black list
remains empty for the time being.

Any German investors in these countries will only face
additional information requirements or a higher tax burden, once there is
sufficient evidence that the grey listed countries have not acted on their
commitment to exchange tax information.

Legarde

Mrs. Lagarde
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