The BVI government has retained a UK attorney at a cost of up to $400,000 to draft a piece of legislation for the territory’s financial services industry as it needs to meet EU requirements to avoid being put on a blacklist.
Queen’s Counsel Michael Furness is set to draft laws in the field of ‘economic substance’, in other words the existence of a tax regime without any real economic activity underpinning it.
The BVI government has been instructed to implement the requisite legislation that supports economic substance by the end of December. With only three months remaining, Cabinet decided to waive the tendering process that was required to contract Furness, local media outlet BVI News reports.
In the EU’s assessment, a range of factors are taken into account including tax transparency, fair taxation and a commitment to combat base erosion and profit shifting (BEPS).
Any jurisdiction judged by Brussels to be deficient within one or more of these areas is placed on either a blacklist or an intermediary ‘greylist’. While just 9 jurisdictions remain on the EU blacklist, 62 countries appear on the ‘greylist’, including the BVI.
The EU classifies the ‘greylist’ as being for those countries where there is one area where concerns remain but a commitment to address it has clearly been set out.
If no progress is made, the BVI will be added to the European Union’s ‘blacklist’ of tax haven jurisdictions and subjected to diplomatic sanctions if it does not have these laws in place by the end of the year.
The ‘blacklist’ was created to categorise jurisdictions that “do not respect the EU’s tax transparency standards”.
British Virgin Islands’ bid to get off the European Union’s blacklist of tax havens could have a negative impact on the local financial services industry, a pillar of its economy.