Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
By Joe Kirwin
European Union member states are considering various options for sanctions on countries that end up on the EU’s tax haven blacklist, including a flexible approach that could lead to different EU countries imposing different measures against the same offending jurisdiction.
EU countries will also be able to maintain their own tax haven blacklist that includes different countries or jurisdictions as well as different sanctions, to those agreed at the EU level. The EU is due to finalize its tax haven blacklist by the end of 2017.
Based on documents seen by Bloomberg BNA, the 28 EU member countries are considering four kinds of sanctions: withholding taxes, new controlled foreign company rules, elimination of deductible costs such as royalties, and participation exemption limitations.
The document is the basis for the negotiations in the EU Code of Conduct Group for Business Taxation, which has been tasked with drawing up the EU tax haven blacklist and the sanctions.
“Identifying specific countermeasures will not mean agreement on their implementation in all cases,” the document states. “There may be arguments for applying different countermeasures for different jurisdictions or in different contexts or that member states should be allowed flexibility on which measures they should apply.”
Furthermore, the document states that the sanctions imposed by EU member countries should be “appropriate in the context of their national tax legislation. It has been suggested that the type of countermeasures to be applied vis-a-vis the various jurisdictions should differ according to the respective specifics of a situation (e.g. political and economic) and the issues that their assessment will raise.”
To accommodate the various approaches, the options outlined in the document include: a flexible approach, rigid approach, or the toolbox approach.
The flexible approach would allow EU member countries to treat the list of sanctions as a “menu” from which to choose. “This option allows a maximum flexibility but can perhaps be considered as complicated,” the document states.
The rigid approach, according to the document “would require a list of countermeasures that is adaptable to the national systems of all member states and suitable for all listed jurisdictions.” In addition the rigid approach “will consequently have to be, at least initially, a very short list, due to differences in principles and specifics of existing national law as well as differences in national legislative processes.”
The third approach involves “the development of tool boxes of countermeasures that would be aimed at addressing specific issues.” An example outlined in the document referred to levies to be applied on outbound royalty payments made to jurisdictions or countries that end up on the EU blacklist. Further toolboxes could be developed eventually according to risks posed by listed jurisdictions or by categories of listed jurisdictions,” the document states. “The advantages of this option are that the countermeasures would be targeted. At the same time it allows flexibility for member states to develop new toolboxes according to the needs that may arise from time to time and to choose from the applicable toolboxes those countermeasures that best fit into their respective national tax system.”
There are 92 countries being “screened” by EU member state officials to determine the blacklist. Among those under scrutiny are the U.S. and Switzerland, who are being assessed against a set of transparency and corporate tax criteria. The process is due to be concluded by the end of September.
Elo Madiste, an official with EU presidency holder Estonia, who works on tax issues, told Bloomberg BNA Aug. 9 that the different approaches and the respective sanctions eventually agreed by EU member states could depend on what countries end up on the blacklist.
“Some countermeasures might not be appropriate for some countries or jurisdictions,” Madiste said. She added that “it could be that the list of sanctions will not be finalized until after the list of countries is agreed.”
The document seen by Bloomberg BNA states that each member state “would of course still be free to apply countermeasures in addition to the EU list as well as maintain a broader national list of non-cooperative jurisdictions.”
The document also outlines ways in which EU legislation can be amended so that any country or jurisdiction on the blacklist would be targeted.
To contact the reporter on this story: Joe Kirwin in Brussels at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)