Caribbean & Central America - January 2018 (ISSN 1741-4458)

In December 2017, the European Union (EU) published a list of ‘non-cooperative tax jurisdictions’. The list includes 17 countries, including four from the English-speaking Caribbean, namely Barbados, Grenada, St Lucia, and Trinidad & Tobago. A further eight Caribbean jurisdictions were given an extension until “early 2018” to respond to the EU’s concerns on the grounds that they were still recovering from the effects of hurricane damage sustained in the summer of 2017. These were Antigua & Barbuda, Anguilla, Bahamas, British Virgin Islands, Dominica, St Kitts & Nevis, Turks & Caicos, and the US Virgin Islands.

In all, 92 countries were chosen for ‘screening’ by the EU. Of those, 20 were given the all-clear while 72 were asked to address deficiencies. Of the 72, 47 countries committed to improve transparency, to stop harmful practices, to “introduce substance requirements”, and to implement Organisation for Economic Co-operation and Development (OECD) specified Base Erosion and Profit Sharing (BEPS) minimum standards; the eight ‘Hurricane Countries’ were given more time; and 17 were put on the blacklist.

In the Caribbean, Curaçao and Jamaica committed to improving transparency standards; Belize, Curaçao, and St Vincent & the Grenadines to improve fair taxation; Bermuda and the Cayman Islands committed to introduce substance requirements; and Aruba and St Vincent & the Grenadines committed to apply OECD BEPS measures.

On the question of ‘fair taxation’, the EU noted: “Those [countries] that choose to have no or zero-rated corporate taxation should ensure that this does not encourage artificial offshore structures without real economic activity.”

With regard to sanctions, an EU statement explained that the list will be linked to EU funding, which cannot now be channelled through entities in the listed countries. Only direct investment, that is the funding of projects on the ground, will be allowed. Other sanctions will include stricter reporting requirements for multinationals with activities in the listed jurisdictions. The European Commission has said that it will also be encouraging member states “to agree on coordinated sanctions to apply at national level against the listed jurisdictions”.

In its statement of 5 December, the EU added: “A country will be removed from the list once it has addressed the issues of concern for the EU and has brought its tax system fully into line with the required good governance criteria.”

The government of Grenada has said that it expects to be removed from the list by the end of January as its inclusion was based on a technical point, namely that it had not clearly committed to complying with certain criteria by 31 December 2018. Grenada says that it has made the necessary commitments and that the reason it had not committed to the end-2018 date in writing was because “a timeline was not in the Code of Conduct request”. However, according to the finance ministry, Grenada had made “high level commitments, complete with timelines, to the EU Code of Conduct group by way of letters on November 17 and 28, 2017”.

The EU list of ‘non-cooperative tax jurisdictions’ is different from its anti-money laundering (AML) list. For countries on the AML list, banks have to apply higher due diligence controls on financial flows towards these countries. The two lists have different objectives and apply different criteria. Nonetheless, according to the EU, “the two lists will complement each other in ensuring double protection for the Single Market against external good governance risks”.