GLOBAL REGULATION: EU tax list ‘not a tax haven list’, says Code of Conduct Group chair.

As published on caymancompass.com, Tuesday 27th April, 2021.

Members of the European Parliament quizzed Lyudmila Petkova, the chair of the EU Code of Conduct Group, on 19 April about how both the group and the EU’s tax blacklist could be reformed.

EU parliamentarians passed a resolution in January that called for stricter criteria to be used so that jurisdictions like the Cayman Islands would be included in the list.

Speaking at a hearing of the European Parliament’s taxation subcommittee, Petkova said certain countries that are often considered tax havens are not on the EU list because of the criteria used.

“The EU list is not a list of tax havens,” she said, explaining it was a list of countries that are not cooperative for tax purposes.

As such, the current list contained the state of play with respect to commitments taken by cooperative jurisdictions to implement tax good governance principles, she added.

Petkova defended the record of the Code of Conduct Group stating that the tax list process established a constructive cooperation with non-EU countries and confirmed a general positive impact on the majority of the jurisdictions concerned.

The Code of Conduct Group was created in 1998 as part of the political commitment of the EU member states to assess potentially harmful preferential tax regimes and to tackle harmful tax competition in the EU. Its activity expanded over time to promote tax good governance beyond the EU borders.

This included the establishment in 2016 of a list of of non-cooperative jurisdictions for tax purposes by the EU Council, which assigned the technical evaluation to the COCG.

Petkova said since the group’s creation more than 130 preferential tax regimes had been changed or abolished, 27 countries joined the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters and 13 additional countries joined the OECD Inclusive Framework on BEPS.

“This shows that the positive approach chosen by the Council has led to a constructive engagement with many jurisdictions around the world and that this intergovernmental initiative has made a positive change,” she said.

Paul Tang, the chair of the subcommittee on tax matters, said the hearing aimed to flesh out the concerns raised by the EU Parliament in its January resolution and help in increasing transparency of the work of the Code of Conduct Group.

In the resolution, MEPs called for a widening of the tax fairness criterion beyond preferential tax rates and questioned whether an informal body such as the Code of Conduct Group was suitable to update the blacklist.

Instead, the resolution demands that the listing process should be formalised through a legally binding instrument by the end of 2021.

Petkova said EU member states are considering broadening the tax list criteria to take into account the extent to which tax systems encourage companies to shift their profits from the EU.

Currently, she noted the group is discussing defensive measures and the interaction between the EU list and the national lists of the member states to increase the credibility of the list.

Addressing criticism of the Code of Conduct Group as secretive, Petkova said the group had gradually enhanced its transparency and was now publishing regular biannual reports to the council as well as other documents on a dedicated website.

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