EU Blacklists Russia as Tax Haven for The First Time
The European Union blacklisted Russia, Costa Rica, the British Virgin Islands and the Marshall Islands as tax havens on Tuesday, bringing the total number of blacklisted countries to 16, the Council of the EU said. The new list has already drawn criticism from experts.
“Tax haven” is the term used to describe a country or place where low or no taxes and financial secrecy and confidentiality are offered to individuals and companies that use these jurisdictions to reduce their tax liabilities or hide their wealth.
Swedish Finance Minister Elisabeth Svantesson, whose country holds the EU Council’s rotating presidency, requested the “listed countries to improve their legal framework and to work towards compliance with international standards in taxation.”
According to the statement, Russia was listed because it adopted last year a new legislation against the good tax governance and halted dialogue with the EU regarding taxation after its aggression against Ukraine.
The Marshall Islands had been put on thai list in 2018 and then taken off but now they are back again because of their low or zero corporate income tax, which is believed to be attracting profits without actual economic activity.
Costa Rica was put on the “gray list” and given until the end of last year to abolish or amend its harmful foreign source income exemption regime. It didn’t do it.
The British Virgin Islands were listed because they failed to comply with the OECD standard on tax transparency.
In addition to blacklisting countries, Svantesson said that the EU lifted North Macedonia, Barbados, Jamaica and Uruguay from the trade bloc blacklist, which consists of countries that have either failed to implement necessary reforms or have not engaged in constructive dialogue with the EU on tax matters.
These now unlisted countries “successfully fulfilled their commitments” and therefore “could be removed,” she added.
Countries on the list may face restrictions and sanctions on their economic relations with the trade bloc. The statement underlined the importance of promoting tax good governance, transparency, and fighting against tax fraud globally.
However, the first 2023’s revision of the list drew some criticism.
Chiara Putaturo, Oxfam’s EU Policy Advisor on Tax, said the EU’s tax havens list “continues to be a total whitewash.”
“Not only did it delist countries with zero corporate tax rates, like Bermuda and Cayman Islands, but ignores EU tax havens, like Luxemburg, despite it being one of the most harmful tax havens in the world,” she added.
The next revision of the list is scheduled for October 2023.