Palau still on EU’s list of tax havens even after recent overhaul of its tax system

Palau President Surangel Whipps Jr.

Palau remains on the European Union’s list of suspected tax havens, which was updated barely a week after President Surangel Whipps Jr. signed the country’s comprehensive tax reform law.

“It is so disappointing to hear as there is no basis for their classification,” Whipps said. “Our tax system has been in place for over 70 years.”

Besides Palau, EU’s updated list, which was released Oct. 5, includes Guam, American, Samoa, Fiji, Panama, Samoa, Trinidad and Tobago, U.S. Virgin Islands and Vanuatu.

The blacklist was set up in 2017 after revelations of widespread tax avoidance schemes used by corporations and wealthy individuals to lower their tax bills. It originally included 25 jurisdictions.

In 2018, Palau committed to implementing tax reforms to meet the EU standards, prompting the bloc's ministers to move the Pacific nation from the blacklist to a so-called grey list of jurisdictions with low tax transparency standards but aiming to become less opaque, an EU document shows.

Palau has been reinstated to the blacklist in 2020.

When asked if he would appeal EU's inclusion of Palau, Whipps replied, "We need to investigate first."

“We just passed a new law that will take effect next October to modernize our tax system with a net income and (Palau goods and services tax),” Whipps said.