In wake of Brexit, EU to put Cayman Islands on tax haven blacklist
The Cayman Islands, a British overseas territory, is to be put on an EU blacklist of tax havens, less than two weeks after the UK’s withdrawal from the bloc.
In a clear indication of the country’s loss of influence on the EU’s decision-making, the bloc’s 27 finance ministers are expected to sign off on the decision next week.
The EU’s blacklist is an attempt to clamp down on the estimated £506bn lost to aggressive tax avoidance every year but member states are not “screened” in the process of drawing up the blacklist. Territories linked to member states have also avoided the blacklist and the UK had heavily lobbied to protect its overseas territories from such scrutiny in the past. On Wednesday, EU ambassadors judged that the islands in the western Caribbean Sea are not effectively cooperating with Brussels on financial transparency, the Financial Times reported.
The Cayman Islands will join Fiji, Oman, Samoa, Trinidad and Tobago, Vanuatu and the three US territories of American Samoa, Guam, and the US Virgin Islands, on the “non-cooperative” list. Last year the UK and its “corporate tax haven network” was judged to be by far the world’s greatest enabler of corporate tax avoidance by the Tax Justice Network. British territories and dependencies made up four of the 10 places said to have done the most to “proliferate corporate tax avoidance” on the corporate tax haven index.
The status of the Cayman Islands and British Virgin Islands had been up for review since being placed on a “grey list” in 2018. The EU had concerns the tax regimes of these territories facilitated offshore structures that attracted profits without real economic activity.
The EU’s member states now believe the Cayman Islands has failed to introduce the necessary legislation to address the problems identified by Brussels. Blacklisted countries face additional hurdles in accessing EU funds and European companies must take additional compliance measures if they do business in the territories.
The decision will be seen as a shot across the bows of the UK ahead of negotiations on the future relationship with the bloc. The EU’s draft negotiating mandate, due to be finalised on 25 February, stipulates that it expects the UK to maintain high standards on tax when the transition period ends in 2020 amid concerns that Boris Johnson’s government could seek to be a “Singapore-on-Thames”, undercutting the European model.
The mandate calls for the UK to commit in a treaty to maintaining standards in term of “exchange of information on income, financial accounts, tax rulings, country-by-country reports, beneficial ownership and potential cross-border tax-planning arrangements”.“It should also ensure that the United Kingdom applies the common standards applicable within the union and the United Kingdom at the end of the transition period in relation to the fight against tax avoidance practices and public country-by-country reporting by credit-institutions and investment firms,” it says. The
Quote of the Day
I am patient with stupidity but not with those who are proud of it.