The European Union has added the British Virgin Islands, Costa Rica, the Marshall Islands and Russia to its list of uncooperative jurisdictions in tax matters.
The list now includes 16 countries. The vast majority are small island nations and half of the listed jurisdictions are in the Caribbean and Central American region.
Swedish Finance Minister Elisabeth Svantesson said, “We ask all listed countries to improve their legal framework and to work towards compliance with international standards in taxation.
“At the same time, I warmly congratulate North Macedonia, Barbados, Jamaica and Uruguay as they successfully fulfilled their commitments and could be removed from the state of play document,” she added.
The EU assesses only non-EU members against a set of tax good-governance criteria, which include tax transparency, fair taxation and implementation of international standards designed to prevent tax base erosion and profit shifting.
The BVI was listed for the first time because of insufficient compliance with the Organisation for Economic Co-operation and Development standard on the exchange of information on request. The EU’s Code of Conduct Group that makes the assessment pointed out that the BVI does not have at least a rating of “largely compliant” by the Global Forum for exchange of information on request.
A peer review of the BVI’s exchange of information regime found that only 23% of requests were fully answered. Reasons for not providing the sought information included that the legal retention period had expired, the companies had been struck from the register or moved to another jurisdiction, notices went unanswered, or the service providers did not have the information.
Some of the issues, the peer review concluded, were the result of legal gaps.
BVI authorities said, in addition, the ability to exchange information had been at least partly impacted by the slow recovery after Hurricanes Irma and Maria in 2017.
The BVI government responded to the EU tax listing, noting that important legislation implemented in January 2023, which should result in a largely compliant rating, had not yet been considered by the EU.
For the Marshall Islands, the EU Council said, there are concerns that the jurisdiction, which has a zero or only nominal rate of corporate income tax, is attracting profits without real economic activity. In particular, the Marshall Islands were found to be lacking in the enforcement of economic substance requirements.
Costa Rica, in turn, had not fulfilled its commitment to abolish or amend the harmful aspects of its foreign source income exemption regime.
The EU Council listed Russia after the code of conduct group screened Russia’s new legislation adopted in 2022 against the good tax governance criteria of the code. It found that Russia had not fulfilled its commitment to address the harmful aspects of a special regime for international holding companies. In addition, dialogue with Russia on matters related to taxation came to a standstill following the Russian aggression against Ukraine.
The EU tax blacklist was created in December 2017 and is revised twice a year. The Cayman Islands was placed on the list once in February 2020 but removed in October of the same year.
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