Facing EU 'tax avoidance' listing, Caribbean islands take action

Monday, March 12, 2018

High-ranking officials from the Bahamas were in Europe on Monday in a last-ditch effort to halt the nation's expected addition Tuesday to the EU's roster of non-cooperative tax jurisdictions, the so-called EU blacklist.

A Reuters report surfacing Friday indicated that the Bahamas, as well as the US Virgin Islands and St. Kitts and Nevis would be added to the list, while St. Lucia would be removed.

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The EU blacklist and its other new tax haven designations have already proven to be catalysts for swift and corrective government responses, as evidenced by the actions of Panama and Barbados after coming on the list in December.

As reported in Bahamas news outlet Tribune, the deputy prime minister and minister of financial services travelled Sunday to plead their case before the regular meeting of EU ministers set for Tuesday. The lobbying effort is centered around efforts to pass emergency legislation in the Bahamas, focusing on the ability of multinational companies to use Bahamian financial products and structures for tax avoidance purposes.

Bahamas attorney general Carl Bethel told the outlet, "I'm now completing a draft bill to capture the immediate concerns of the Europeans with regard to the effective implementation of the BEPS initiative, meaning the booked profits and losses of non-resident companies that may be resident in the jurisdiction will have to be subject to country-by-country reporting."

Reprieve no more

Expected other action from EU ministers this week includes adding Anguilla, Antigua and Barbuda, Dominica and The British Virgin Islands to the 'grey list' of jurisdictions not in compliance with EU tax avoidance standards, but showing some degree of cooperation to repair their situations.

The EU statement in January announcing the removal of Panama, Grenada and Barbados from the 'black list', also clarified that eight Caribbean jurisdictions (Antigua and Barbuda, Anguilla, Bahamas, British Virgin Islands, Dominica, St. Kitts and Nevis, Turks and Caicos, and the US Virgin Islands) that were badly hit by hurricanes in 2017 had been given a reprieve to respond to EU concerns.

The EU, however, now appears to be lifting the grace period as it prepares to act.

Antigua and Barbuda Prime Minister Gaston Browne acknowledged his government was aware of the imminent EU action, as reported in daily Antigua Observer.

"Large OECD countries are now making the claim that profitable corporations are shifting their profits overseas to avoid paying taxes, and they're now saying that countries that facilitate that type of shifting of business to provide these corporations with a tax shield, that they will be grey-listed or black- listed. Luckily for us, we're only grey-listed," Browne said, adding A&B was preparing to harmonize its offshore bank tax rate at 20% by year-end.