EU finance ministers approved on Tuesday the addition of more countries to the EU's blacklist of tax havens, adding the United Arab Emirates and British and Dutch overseas territories in a revamp that tripled the number of listed jurisdictions..
"The purpose of the list is to encourage cooperation and positive change and not to name and shame," said Eugen Teodorovici, minister of public finance of Romania, which is currently holding the EU's rotating presidency.
EU finance ministers added 10 jurisdictions to the updated list. They are: the Dutch Caribbean island of Aruba, Barbados, Belize, the British overseas territory of Bermuda, Fiji, the Marshall Islands, Oman, the United Arab Emirates, Vanuatu and Dominica.
Because we have chosen to be an international financial centre, we have to comply with the world’s regulation"
The five original jurisdictions were Samoa, Trinidad and Tobago, American Samoa, Guam and the US Virgin Islands. Now, Aruba, Barbados, Belize, Bermuda, Dominica, Fiji, Marshall Islands, Oman, United Arab Emirates, Vanuatu have been added.
These 15 jurisdictions are on the list because they were either already on the blacklist and had taken no commitment to change (original five) or have moved from the ‘grey list' to the blacklist because they failed to implement reforms in the one-year deadline.
The EU finance ministers adopted a list of "non-cooperative tax jurisdictions", which is another way to label tax havens. The blacklist was created in December 2017 to encourage transparency and fairer tax competition, while preventing and stopping tax fraud, evasion and avoidance.
The UAE said it regretted the European Union's decision to include it on a list of non-cooperative jurisdictions for tax purposes, according to Emirati state-news agency WAM.
"This inclusion was made despite the UAE's close cooperation with the EU on this issue and ongoing efforts to fulfil all the EU's requirements," a statement read, adding that "the UAE remains firmly committed to its long-standing policy of meeting the highest international standards on taxation, including the OECD's (Organisation for Economic Cooperation and Development) requirements, and will continue to update its domestic legislative framework in this regard."
The decision was caused by "lack of communication" between the EU and the UAE government, the head of the UAE Banks Federation said, Reuters reports.
"We need to reach out. I understand the reasons, and I'm sure the UAE will want to play as a global citizen," Abdulaziz al-Ghurair, the banking group's chairman, told reporters during a banking conference in Dubai. "I'm sure in the near future this will be solved."
Blacklisted states face stricter controls on transactions with the EU, although no sanctions have yet been agreed by EU states.
"Because we have chosen to be an international financial centre, we have to comply with the world's regulations ..." Al-Ghurair said. "We had issues like this in the past and they've been solved."
Bermuda is also seeking to be removed from the blacklist. The island's premier David Burt expressed his surprise and disappointment at the EU's decision during a press conference, in which he stated that he believes the country has worked hard to craft a tax regime that now meets the required standards.
"Bermuda is compliant and we are confident that within a matter of weeks, that will be accepted by EU Member States and Bermuda will be removed from this list," Burt said.
"Working together we will preserve investor and business confidence and continue to demonstrate that Bermuda has met the standard required by the EU," he continued.
"I wish to assure the people of Bermuda that we do not anticipate any sanctions to be levied against us and this will in no way affect how we travel or otherwise interact with the EU."
Burt's confidence was shared by the UK Government, who stated via the Treasury that: "Bermuda has legislated to address the issue identified. In light of this we expect Bermuda, and other compliant jurisdictions, to be removed from the list at the next available opportunity."
Bermuda's industry groups have also pledged support for the market's record on compliance and tax-transparency and are backing the government's efforts to expedite the island's removal from the list of ‘non-cooperative' jurisdictions.
The EU also approved the removal of South Korea from its tax haven blacklist of non-cooperative jurisdictions. It was the EU's response to the South Korean government ending its long standing practice of providing corporate tax cuts to foreign companies for up to seven years, which the EU viewed as being unfair to businesses that did not directly invest in the country, and designated South Korea a non-cooperative jurisdiction in December 2017.
South Korea's National Assembly voted to abolish its system for incentivizing foreign investment in December 2018.
The EU has now formally confirmed Jersey's position as a cooperative jurisdiction following an extended period of screening. Responding to the news, Joe Moynihan, CEO, Jersey Finance, said:
"We're pleased that the work Jersey's government and financial regulator have undertaken over the past year or so, with industry input, to implement economic substance legislation has been recognised by the EU. We have said all along that Jersey was willing and able to work with counterparts in the EU to meet the criteria laid out by the EU's Code of Conduct Group.
"Having these new rules now in place should give investors and other stakeholders a clear indication of just how seriously Jersey takes its obligations as a well-regulated IFC and of its ongoing commitment to play a positive role in Europe's future.
"The expectation is that, given the high professional standards and commitment to good corporate governance that already exists in Jersey, most companies will readily be able to demonstrate that they meet the new substance requirements."