The European Union adds Russia to its blacklist of tax havens

The European Union has added Russia to its blacklist of tax havens after the nation amended its enterprise laws in a method the bloc considers detrimental and unfair.

“The Russian Federation has not fulfilled its dedication to amend its dangerous preferential tax regime,” financial and finance ministers from the 27 member states mentioned after assembly on Tuesday.

The breakdown in dialogue between the EU and Russia because of the invasion of Ukraine prevented the tax frictions from being resolved, ministers famous.

“With Russia, clearly, at present there is no such thing as a engagement,” mentioned Valdis Dombrovskis, the European Fee’s government vice-president.

“One can’t clearly say that Russia is cooperating on tax issues.”

Swedish Finance Minister Elisabeth Svantesson, whose nation holds the EU Council’s rotating presidency, mentioned the choice was not primarily based on a “political purpose,” regardless of the actual timing, however fairly on a technical evaluation that proved Russia had “failed” to handle the dangerous components of its laws.

These components relate to the revenue from mental property and so-called “grandfathering provisions,” which permits enterprise entities to observe previous guidelines as a substitute of latest ones.

The EU Council didn’t instantly reply to a request for additional clarification.

Additionally on Tuesday, ministers added the British Virgin Islands, Costa Rica and the Marshall Islands to the blacklist, bringing the overall to 16 jurisdictions.

‘Complete whitewash’

First adopted in 2017, the EU’s tax record is up to date twice a 12 months.

Brussels insists the general public catalogue is not meant to “identify and disgrace” different international locations, however to “encourage constructive change” in tax practices by way of cooperation and continued dialogue.

International locations around the globe are assessed towards three key standards: tax transparency, truthful taxation, and measures to sort out base erosion and revenue shifting (BEPS) by multinationals.

Those that do not adjust to the factors are requested to make adjustments to their laws.

In the event that they refuse to take action, the EU can add them to the record, which does not use the politically charged time period of “tax haven” and as a substitute speaks of “non-cooperative jurisdictions.”

The labelling does not entail any reprisals or sanctions past the reputational harm.

On Tuesday, ministers granted Hong Kong, Malaysia and Qatar, three international locations underneath scrutiny for his or her tax regimes, an extension to make reforms.

Barbados, Jamaica, North Macedonia and Uruguay had been discovered to have accomplished the required steps.

Ministers additionally highlighted latest commitments made by Aruba, Curaçao, Belize, Israel and Albania, an official candidate to affix the 27-strong bloc.

The EU’s blacklist has usually been the goal of criticism from tax consultants and civil society organisations, who argue its scope is way too restricted and fails to focus on member states, corresponding to Luxembourg and the Netherlands, that current traits of tax havens.

Chiara Putaturo, a tax coverage advisor at Oxfam’s EU workplace, lambasted the record as a “complete whitewash” for excluding jurisdictions like Bermuda and Cayman Island, two abroad territories identified for internet hosting shell corporations utilized by companies to keep away from paying increased taxes of their residence international locations.

“With this joke record, the EU continues to permit the super-rich and worthwhile to stash away their fortunes whereas strange individuals are battling with the cost-of-living disaster,” Putaturo mentioned in an announcement.

“The replace is one more missed alternative to place an finish to tax havens and get billions again to bridge the hole between the super-rich and strange folks.”