The European Council has added Dominica to the controversial EU list of non-cooperative jurisdictions in tax matters and removed Barbados from the list.
The EU said Dominica is on the blacklist because it only received a ‘partially compliant’ rating related to its tax information exchange arrangements and has not yet resolved this issue.
For the purposes of the list, the EU requires jurisdictions to be at least ‘largely compliant’ with the international standard on transparency and exchange of tax information on request.
Barbados was added to the EU list in October 2020 for the same reason after it received a ‘partially compliant’ rating from the Global Forum on Transparency and Exchange of Information for Tax Purposes.
Barbados has applied for and was granted a supplementary review of its tax information exchange regime by the Global Forum and will therefore be grey-listed pending the outcome of this review.
The grey list, or state-of-play document, includes jurisdictions which do not yet comply with all international tax standards but which have made sufficient commitments to implement tax good governance principles, according to the EU.
The European Council removed Morocco, Namibia and Saint Lucia from the document on Monday as they have fulfilled all their commitments, the EU said.
However, Jamaica has been added as it has committed to amend or abolish a harmful tax regime related to its special economic zone by the end of 2022.
Australia and Jordan have been granted an extension to the deadline for fulfilling their commitments as the assessment of their reforms by the 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.
Growing criticism of tax list
The EU’s tax blacklist has attracted growing criticism from all sides. In January, the EU Parliament passed a resolution demanding an extension of the tax list criteria to specifically target zero tax jurisdictions.
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, stating 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.
The resolution is not binding but the EU Commission has to respond.
Barbados-based economist Marla Dukharan last year criticised the EU for institutionalised racism and bullying. She stated that the EU “weaponizes its rules by arbitrarily, unilaterally, selectively and disproportionally imposing them on certain hapless non-EU members”.
Following the latest update, 12 jurisdictions remain on the list: American Samoa, Anguilla, Dominica, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.
The argument that the tax blacklist predominantly targets small island nations in the Caribbean and the Pacific which have no relevant financial services sectors to speak of will only be fuelled by the addition of Dominica.
The omission of Turkey, in turn, draws attention to the arbitrary nature of the listing process.
The EU had given that country a deadline to commit by the end of last year to facilitate the exchange of tax information, but Turkey failed to do so.
Although this should have triggered a blacklisting, council members decided to extend the deadline until May 2021.
The 27 EU member states were split on the issue as the EU and Turkey are trying to ease political tensions, which have been worsened by Turkey’s gas exploration in the eastern Mediterranean.
In particular, Germany, which has a large Turkish population, and is attempting to smooth its political relations with Turkey, is said to have resisted the blacklisting.