LUXEMBOURG – European Union finance minister agreed to remove the United Arab Emirates, Switzerland and Mauritius from the bloc’s list of countries deemed to be acting as tax havens, a move that activists called a “whitewash”.
The 28-nation EU set up a blacklist and a gray list of tax havens in December 2017 after revelations of widespread avoidance schemes used by corporations and wealth individuals to lower their tax bills.
Blacklisted states face reputational damage and stricter controls on transactions with the EU.
As part of the regular review of the lists, the ministers decided to drop the UAE from the EU blacklist that convers jurisdictions that have failed to cooperate with the EU on tax matters.
The Marshall Islands have also been removed from the list, which still includes nine extra –EU jurisdictions – mostly Pacific islands with few financial relations with the EU.
The UAE, the largest financial center which was blacklisted, was removed because in September it adopted new rules on offshore structures, the EU said, giving a clean-sheet on its tax practices.
The Gulf state charges no corporate taxes, making it a possible target for firms seeking to avoid paying tax in the countries where they actually operate.
The EU does not automatically add countries that charge no tax – a sign of being a tax heaven – to its blacklist, but it requested the UAE introduce rules that would allow only companies with a real economic activity there to be incorporated in order to reduce risk of tax dodging.
Under an initial version of the overhaul, the UAE exempted from the requirement “all entities in which the UAE government, or any of the Emirates of the UAE, had direct or indirect ownership (no threshold) in its share capital”, an EU document said.
That reform was deemed insufficient by EU states and prompted an amendment, adopted in September, that excluded from the requirement only companies in which the UAE government owns directly or indirectly a 51% share of the capital.
This reform was considered by EU ministers as sufficient to remove the UAE from the blacklist.
Jurisdictions that remain blacklisted are Belize, Fiji, Oman, Samoa, Trinidad and Tobago, Vanatu and the three U.S territories of American Samona, Guam, and the U.S. Virgin Isnlands.
Major economic partner Switzerland was removed from the EU gray list covering countries that have committed to change their tax rules to make them compliant with EU standards. It has delivered on its commitments, the EU said, and therefore is no loner listed.
They also removed the Indian Ocean island of Mauritius, Albania, Costa Rica and Serbia from the gray list, leaving around 30 jurisdictions on the list.
Countries in the gray list could be moved to the blacklist if they fail to deliver on their commitments.