Late last week, the Finance Ministers of EU member states agreed on a list of 17 countries which according to the EU have failed to meet agreed tax good governance standards.  These countries are all non-EU member states and are the following: American Samoa, Bahrain, Barbados, Grenada, Guam, Korea (Republic of), Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia, and the United Arab Emirates. Most of these jurisdictions have preferential tax regimes, or do not abide by minimum EU standards and standards set by the Global Forum on Transparency and Exchange of Information for Tax Purposes amongst others.

EU release list of countries who have not met agreed tax good governance standards

The Council in its conclusions also provides for 47 other jurisdictions which have committed to addressing certain deficiencies in their tax regimes and to meet the required criteria following communication with the EU.  This list includes jurisdictions such as Turkey, Hong Kong, Jordan and Isle of Man.

This list has been issued with the aim of having a dissuasive effect which encourages jurisdictions to improve their tax systems in order to be able to be taken off the list.  At the same time, the EU also aims to create efficient protective mechanisms to fight the erosion of Member States’ tax bases through tax fraud, evasion and avoidance as a result of the use of such third country tax systems, as the Panama Papers have shown.

Finally, the Council also encourages Member States to take on administrative defensive tax measures in their own jurisdiction such as reinforced monitoring of certain transactions or increases audit risks for taxpayers benefiting from such regimes or structures involving such regimes.

Clearly, it remains to be seen how, and if, such list will have any effect in practice.  However, it is an additional step that the EU has taken in order to promote tax transparency and fight tax avoidance and abuse.