Aruba's International Tax Counsel Reveals Impact Of EU Tax Rules

by Amanda Banks, Tax-News.com, London

03 November 2004

In an interview recently published by the LMG news service, international tax counsel to the government of Aruba, John Sanders argued that the European Union's Code of Conduct on Business Taxation is unfair on the affiliated territories and dependencies of EU member states, which are forced to comply with more strict rules than their non-EU counterparts.

He went on to explain that although offshore finance centres with no EU links are encouraged to come into line with the rules on tax competition laid out by the Organisation for Economic Cooperation and Development (OECD), the multilateral body has softened its approach in recent years, shifting its focus to the issues of transparency and tax information exchange.

The EU rules, however, still contain provisions outlawing so-called "ring fencing" and preferential tax regimes for companies on the basis of their origin.

“Many of the UK territories have said that because they cannot have preferential regimes they will abolish corporate taxes altogether,” Mr Sanders explained to the news service, observing that: “They can easily do that because the nature of their economies means they will hardly suffer from it."

He went on to add, however, that:

“The situation now is that the member states get the benefits [of eradicating harmful tax competition, which protects tax revenues], most associated territories can deal with it and the only places that have a problem are the Netherlands Antilles and Aruba. This creates the most uneven playing field imaginable.”

According to the LMG report, Aruba has committed to end its tax-exempt company scheme by the end of next year in order to comply with EU rules.

The Netherland Antilles, meanwhile has somewhat more pressing matters to attend to, after it emerged last month that a commission appointed by the Dutch and Antillean governments had recommended the breaking up of the Caribbean jurisdiction of the Netherland Antilles into separate entities within the Dutch Kingdom.

According to the findings of the commission headed by former Antillean governor Edsel Jesurun, the islands of Curacao and St Maarten should be made autonomous countries alongside the Netherlands and the Caribbean island of Aruba, whilst the remaining three islands - Saba, Bonaire and St. Eustatius - should be brought under the direct control of the Dutch government in The Hague.

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