Guam, Palau and the Marshall Islands are among the 17 tax havens blacklisted by the EU for failure to match up to international standards for tax transparency, fair taxation and mechanisms against base erosion and profit sharing, allowing the world's wealthiest people to conceal their assets and evade tax payments.
Despite earlier commitment to meet global criteria, the EU said, the “non-cooperative” jurisdictions “have taken no meaningful action to effectively address the deficiencies and do not engage in a meaningful dialogue on the basis of the criteria that could lead to such commitments.”
During a meeting Dec 5, the EU Council adopted the list in a bid to curb the estimated £506 billion in losses that resulted from the erosion of member states' tax bases through tax fraud, evasion and avoidance.
“Guam does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, does not apply the BEPS minimum standards and did not commit to addressing these issues by 31 December 2018,” reads the Outcome of Proceedings.
In the case of Palau and Marshall Islands, the EU noted that the two Pacific nations facilitate “offshore structures and arrangements aimed at attracting profits without real economic substance and refused to engage in a meaningful dialogue to ascertain its compliance of with criterion.”
The list also includes American Samoa, South Korea, Mongolia, Namibia, Panama, Trinidad & Tobago, Bahrain, the United Arab Emirates, Barbados, Grenada, Macau, St Lucia, Samoa and Tunisia.
The EU said “the tax legislation, policies and administrative practices of these jurisdictions result or may result in a loss of tax revenues for member states and that such jurisdictions should therefore be strongly encouraged to make the changes needed to remedy this situation.”
Without an effective mechanism against BEPS, multinational companies exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity.
Due to the globalization of business operations, an increasing number of multinational corporations are stashing cash in offshore tax havens to minimize corporate taxes.
In a statement, the UK Treasury said: “Today’s publication marks an important step in our ongoing efforts to tackle tax avoidance and evasion internationally. This is clearly working, as over 40 jurisdictions have made significant commitments to reform as part of this process. For those that are on today’s list, we hope that this increased scrutiny and the potential for counter-measures will lead them to reconsider their approach.”