“The European Union plans to update its year-old blacklist of tax havens to include new criteria and an expanded geographic reach—possibly all the way to the U.S,” according to a story in the Bloomberg Tax.

The story said, “The bloc has previously threatened that the U.S. could wind up on the blacklist, along with the likes of Guam and Trinidad and Tobago, unless it adopts stricter financial reporting standards and agrees to share that information with other tax authorities.

“The 2019 blacklist of tax havens will include those that haven’t adopted the Organization for Economic Cooperation and Development’s Common Reporting Standard, like the U.S.

“‘So far the Trump Administration has not moved to adopt the OECD Common Reporting Standard,’ Paul Tang, a member of the European Parliament from the Netherlands, told Bloomberg Tax.

“‘We have been assured by the European Commission that if it does not do so by June of next year [2019] the process for it being listed will begin.

“‘We have a situation where the United States does not meet the transparency criteria but the EU member states have decided to ignore that,’ Tang said. “This goes to show that the process is political.”

“Countries on the blacklist could face sanctions—measures the EU has discussed include imposing withholding taxes on any funds moved from the EU to a country on the list,” Bloomberg reports.

“The new criteria for the blacklist adopted for 2019 will require countries to apply the OECD’s base erosion and profit shifting minimum standard—requiring companies with a $750 million global turnover to report country-by-country tax and profits to national tax authorities.

“The EU is also negotiating new rules to require countries or independent territories to apply transparency standards to publish the beneficial owners of companies,” Bloomberg said.

The United Kingdom is also working to do the same to their small overseas territories, with the British Parliament passing legislation which seeks to allow them to order the Overseas Territories, including Bermuda, to implement public registers.

This was not well received by the Territories, with some of the jurisdictions stating that it was a return to colonialism for the UK to legislate directly for them, and also noted that public registers are not currently the global standard.

“‘Negotiations are ongoing with the beneficial ownership requirement but the idea is to target millions of shell companies based in offshore financial centers,” an EU diplomat told Bloomberg Tax on the condition of anonymity.

“‘There is a general pressure on companies using offshore financial centers, driven by politics, popular media and multinational organizations such as the OECD,” Antony Mancini, a tax partner with KPMG Channels Islands Ltd. told Bloomberg Tax.

“‘So far the process has been an overall failure because the process has been unfair or inconsistent,’ Jeppe Kofod, a Danish member of the European Parliament told Bloomberg Tax. “When we have tax havens within the EU and they are not on the list it makes, it hard to go after others outside the EU.”

Bermuda, while not listed as a “non-cooperative jurisdiction” on the EU’s original list, was placed on a secondary list along with over 60 other nations and territories.

Citing the “existence of tax regimes that facilitate offshore structures which attract profits without real economic activity,” the Council said “the following jurisdictions are committed to addressing the concerns relating to economic substance by 2018: Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey and Vanuatu.”

On Monday, MPs passed the Economic Substance Bill 2018 in the House of Assembly, with the Bill receiving bipartisan support, with MPs on both sides of the aisle noting that the larger nations like to use their power to affect smaller jurisdictions like Bermuda that offer financial services.

The Bill’s explanatory memorandum states it “imposes an obligation on an entity that is engaged in a relevant activity to maintain a substantial economic presence in Bermuda and, in that regard, comply with economic substance requirements.”

You can read the full story here on Bloomberg Tax.

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