Jersey and Guernsey have not been included in the EU’s newly released list of 17 blacklisted jurisdictions seen as not cooperative on tax matters.
The EU Code of Conduct Group on Business Taxation (Code Group) has determined that the islands are cooperative tax jurisdictions, and will work with them in 2018 to ensure this position is maintained.
The assessment, which was approved by EU Finance Ministers at the meeting of the Economic and Financial Affairs Council in Brussels this week, follows a year-long screening process.
Following multiple disclosures of offshore tax avoidance schemes by companies and wealthy individuals, EU states launched a process in February to list tax havens in a bid to discourage setting up shell structures abroad that are themselves in many cases legal but could hide illicit activities.
Blacklisted countries could lose access to EU funds. Other possible countermeasures will be decided in the coming weeks.
The EU blacklist includes: American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.
Jersey, Guernsey and the Isle of Man are, however, included in a wider ‘grey list’ of 47 countries that have promised to bring their fiscal rules into line with EU expectations. This list also includes Hong Kong, Bermuda, the Cayman Islands, Switzerland and Turkey.
Channel Islands respond
Channel Island leaders have welcomed the EU’s decision not to include Jersey and Guernsey on the blacklist, but also recognise the need to meet EU expectations going forward.
Guernsey Finance Chief Executive Dominic Wheatley said: “The government of Guernsey is regularly liaising with authorities in key markets, including the EU, to address issues of clarity or concerns. It is important this engagement continues to ensure our standards of economic substance are aligned with those being developed by the EU to safeguard Guernsey’s continued and fair market access and maintain a good trading relationship with the EU and its member states.”
Deputy Gavin St Pier, President of Guernsey’s Policy & Resources Committee, added: "The evaluation process has led to the Code Group setting out broad areas where it would like cooperative non-EU jurisdictions such as ours to take further steps to support economic substance.
"Guernsey is already committed to the OECD's anti-BEPS action plan on economic substance, has put in place country-by-country reporting, and in June was a signatory to the BEPS multi-lateral instrument. We look forward to engaging with the Code Group early in 2018 to identify steps to strengthen our approach to economic substance.”
Jersey has made a written commitment to addressing concerns identified by the Code Group by the end of next year. These relate to a perceived lack of legal substance requirements that could lead to profits being registered in Jersey that do not demonstrate real economic activity.
Jersey’s Chief Minister, Senator Ian Gorst, commented: “I look forward to entering into substantive dialogue in the new year. Our discussions may include creating enhanced reporting obligations or changes to our legislation on economic substance.”
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