UAE promises swift action on EU tax haven designation
▶ Finance Ministry says it expects to be removed from the list after complying with profit jurisdiction regulation
The UAE expressed disappointment and surprise at its inclusion among 17 countries designated by the EU as alleged non-compliant global tax jurisdictions, and said it expected to be removed from the list after the implementation of outstanding measures that will be adhered to in the coming year.
The Government said it was committed to maintaining the highest standards of financial oversight and tax regulation and would continue to work with international partners to ensure compliance.
The move came as a surprise to observers who noted that countries known to be havens for tax evaders, such as the Cayman Islands, were not included in the list.
The UAE has also been clamping down on financial crime for many years.
The ministry said that it expected to be removed from the blacklist once it complies with the base erosion and profit shifting minimum standard, a rule that seeks to limit shifting of profits to jurisdictions where there is low or no tax.
“The UAE has worked to meet the European Union’s requirements in terms of exchanging tax-related information,” said Younis Al Khouri, the UAE’s undersecretary of finance in the statement. “We have committed to a reform process that will be finalised by October 2018, and we are absolutely confident that this will ensure the UAE is swiftly removed from the list.
“We look forward to moving into the next phase of co-operation with our EU partners on the important issue of tax regulation.”
Jeremy Cape, a tax lawyer at Squire Patton Boggs, said that “the ‘tax haven’ label is imprecise – and highly politicised – but has clear and negative connotations”.
“It is seen as a mechanism to apply international pressure on countries to align their tax regimes with globally agreed standards,” he said, adding that countries on the list could have their access to funding by EU instititutions limited.
The UAE expressed disappointment and surprise at its inclusion among 17 countries designated by the EU as alleged non-compliant global tax jurisdictions.
It expected to be removed from the list after the implementation of outstanding measures that will be adhered to in the coming year.
The UAE Government said it was committed to maintaining the highest standards of financial oversight and tax regulations and would continue to work with international partners to ensure compliance.
The Ministry of Finance said it expected to be removed from the blacklist once it complies with Base Erosion and Profit Shifting (BEPS) Minimum Standard, which seeks to limit shifting of profits to jurisdictions where there are low or no taxes .
“The UAE has worked to meet the European Union’s requirements in terms of exchanging tax-related information,” said Younis Al Khouri, the UAE’s undersecretary of finance.
“We have committed to a reform process which will be finalised by October 2018, and we are absolutely confident that this will ensure the UAE is swiftly removed from the list.
“We look forward to moving into the next phase of co-operation with our EU partners on the important issue of tax regulation.”
The countries on the list are: American Samoa, Bahrain, Barbados, Grenada, Guam, Macau, the Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, South Korea, Trinidad and Tobago, Tunisia and the UAE.
Late yesterday, Bahrain said the government “strongly believes that the country cannot be considered a tax haven as it is globally recognised for the strength and transparency of its financial regulatory infrastructure”.
“Bahrain will initiate dialogue with the EU on this matter, to ensure understanding and recognition of the Kingdom’s efforts to ensure financial transparency, international cooperation and a robust regulatory environment,” it said.
South Korea, which has a free trade deal with the EU, was listed because it has “harmful preferential tax regimes”, while the UAE does not apply minimum global standards against tax avoidance, the EU said.
The UAE Finance Ministry said since early this year it has been working with EU counterparts to make sure that the country met the criteria laid down by the EU member states.
The ministry has addressed every issue raised by the EU with only the BEPS Minimum Standard still to be implemented.
The UAE has committed to finalise that by October 2018 and ratify it by March 2019 to give time for full implementation across the seven emirates.
“We are confident that we will be recognised as an internationally compliant partner at the EU’s next review,” the ministry said.
Economists and analysts also expressed surprise at the move, saying that many countries that are tax havens were not included on the list. They noted that because the credibility of the list was in question and because there are no sanctions that it was unlikely to affect the country’s economy.
“We don’t think the inclusion of the UAE in the EU blacklist will have any major impact because the list is first of its kind, and it is unclear what ramifications it will have on the countries included,” said Mohamed Bardastani, a senior economist at Oxford Economics.
“The EU states also failed to address what sort of actions or sanctions they’d take against the countries in the blacklist. The credibility of the list is questionable as well as more notorious tax havens like Cayman and Virgin Islands are absent from the blacklist and instead included in the ‘grey list’. “
We don’t think the inclusion of the UAE in the EU blacklist will have any major impact because it is first of its kind MOHAMED BARDASTANI Oxford Economics