Bermuda one of 15 countries blacklisted by EU over tax standards
In what represents both a shock and a blow to the Bermuda Government and a potential headache for re/insurers based there, the European Union (EU) has blacklisted Bermuda for failing to meet good tax governance standards.
Bermuda is one of 15 countries included on the blacklist. It moves from the so-called grey-list to the blacklist for having failed to follow up on commitments previously made but not taken.
The Bermuda Premier David Burt responded by admitting being blacklisted was a “setback” but he added that he is also confident Bermuda will soon be removed from the blacklist.
In the past year, the EU Commission assessed 92 countries on their tax transparency, good governance, real economic activity, and whether the country had a zero corporate tax rate.
The EU welcomed action taken by 60 countries to address and resolve the concerns raised adding that “over 100 harmful regimes were eliminated”, while the list was cited as having a positive influence on internationally agreed tax governance standards.
However, EU finance ministers said they were were forced to blacklist 15 countries based on the Commission’s findings. These included American Samoa, Guam, Samoa, Trinidad and Tobago, and US Virgin Islands, which made no commitments to change since the first blacklist was published in 2017. Barbados, United Arab Emirates and Marshall Islands have also been added to the list for failing to follow up on pledges to change.
Aruba, Belize, Bermuda, Fiji, Oman, Vanuatu and Dominica were moved from the ‘grey list’ to the blacklist for not abiding by commitments they had made.
Changes to EU legislation mean EU funds cannot be channelled or transited through entities in countries on the blacklist.
The EU said it would continue to monitor a further 34 countries in 2019, which are on the grey list, while 25 countries from the original screening process have been cleared.
EU finance ministers said that the list of non-cooperative tax jurisdictions has been “a true success” as many countries have updated their laws and tax systems to meet international standards.
Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs, said: “Thanks to the listing process, dozens of countries have abolished harmful tax regimes and have come into line with international standards on transparency and fair taxation. The countries that did not comply have been blacklisted, and will have to face the consequences that this brings. We are raising the bar of tax good governance globally and cutting out the opportunities for tax abuse."
The first blacklist was published in 2017 and had 17 countries on it. It has been used to tackle risks of tax abuse and unfair tax competition globally. The European Commission said the next assessment would be developed to include more compulsory transparency criteria. Three G20 countries will also be added to the next screening: Russia, Mexico and Argentina.
EU member states can choose from a set of countermeasures to use against blacklisted countries. For example, increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions. The Commission said it would help member states to take an ever more coordinated approach to sanctions for the EU list in 2019.
