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New Iteration of EU Blacklist Adds Cayman Islands, Panama & Others

New Iteration of EU Blacklist Adds Cayman Islands, Panama & Others

The latest iteration of the European Union’s blacklist of non-cooperative tax jurisdictions was released earlier this week with several new additions.

The Cayman Islands, Panama, Seychelles and Palau join Fiji, Oman, Samoa, Trinidad and Tobago, Vanuatu and the US territories of American Samoa, Guam, and the US Virgin Islands as jurisdictions blacklisted by the EU for failing to do enough against tax avoidance and evasion.

According to the EU, the Cayman Islands, a UK territory, has been added for failing to set “appropriate measures” against these types of abuse and allowing companies to establish shell companies with minimal presence in situ.

The Cayman Islands had previously been listed in the EU’s grey list but was demoted once it failed to implement the economic substance rules required by Europe.

As explained by the Cayman Islands’ Ministry of Finance, its addition to the EU blacklist “stems from Cayman’s legislation [on economic substance for collective investment vehicles] not being in force by 4 February, which was the date of the EU’s Code of Conduct Group (CoCG) meeting to advise the EU Finance Ministers, prior to the Finance Ministers’ decision regarding the listing” this week.

Currently, the Cayman Islands does not levy an income, corporate or capital gains tax.

EU & Cayman Island Authorities Speak Out on Blacklist

EU & Cayman Island Authorities Speak Out on Blacklist

Following the addition of the Cayman Islands to the EU blacklist, EU officials warned the UK that it would not tolerate tax abuse from its territories.

Markus Ferber of the Christian Democrat EPP group, said, “The U.K. would be well advised to take note that EU Finance Ministers put a British Overseas Territory on the blacklist of tax havens,” adding that “this sends a clear signal that the idea of turning the U.K. into a tax haven will not be acceptable to the EU.”

However, Cayman Finance, the association of the financial services industry in the UK territory, supported the government’s efforts to have the Cayman Islands removed from the EU blacklist.

Jude Scott, Cayman Finance’s CEO, said in a statement, “The Cayman Islands has had a track record of meeting evolving global standards and that is expected to continue.”

“As an organisation, we stand ready to work with government, as it sees fit, as it cooperates with the EU to be removed from the list,” Scott said. “We anticipate this decision will happen in the not too distant future.”

“Just as approximately 30 other jurisdictions were removed after a taking the necessary actions, we look forward to the same happening with regard to the Cayman Islands. In the meantime, clients can continue to expect the usual high professional standards from their Cayman service providers that they have always received,” he added.

The Cayman Islands Institute of Professional Accountants shared this sentiment and expects the government to move quickly to have the jurisdiction delisted.

CIIPA CEO Sheree Ebanks said, “While it is disappointing that the Cayman Islands has been placed on the list of non-cooperative jurisdictions, the Cayman Islands Institute of Professional Accountants fully supports the Government’s efforts towards delisting. CIIPA is committed to continue to work with Government to overcome the technical issues that led to the EU’s decision, and with the excellent public sector-private industry collaboration will be removed from this list at the earliest possible opportunity.”

Despite these recent additions, Oxfam International, an NGO fighting poverty and tax abuse, believes the EU should be stricter in terms of who gets placed on its blacklist.

In a press release, Oxfam said: “The list still proves inadequate: EU governments have let the Bahamas, Bermuda and the British Virgin Islands – some of the world’s most harmful tax havens – off the hook. These countries run an unfair tax competition and lead the race to the bottom in corporate tax by offering zero-tax rates, or very low tax rates, so that companies avoid paying their fair share.”

“What’s more, the credibility of the blacklisting process continues to be undermined by the EU’s own tax havens. They are exempted from the screening despite failing the EU criteria and offering sweetheart tax deals to companies,” Oxfam added.

In addition to these new blacklisted countries, the following jurisdictions were removed from the EU’s grey list after successfully implementing the necessary regulatory changes to prevent tax abuse: Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts & Nevis, and Vietnam.