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EU Considering New Sanctions For 'Tax Havens'

by Ulrika Lomas,, Brussels

15 August 2017

The EU is considering four new kinds of sanctions for jurisdictions included on a forthcoming "blacklist" of so-called tax havens, according to reports.

In November 2016, the European Council resolved that a EU list of non-cooperative jurisdictions should be drawn up in 2017. The "screening" of third countries is scheduled for completion by the end of September, to enable the Council to endorse the full list by the end of the year. Screening is intended to be a continuous and regular process.

Bloomberg BNA said that it had seen a document which shows that the EU is considering four kinds of sanctions for jurisdictions deemed to be non-cooperative. According to Bloomberg BNA, these are: "withholding taxes, new controlled foreign company rules, elimination of deductible costs such as royalties, and participation exemption limitations."

Bloomberg BNA said that the EU is also considering a scheme whereby individual member states could apply different sanctions against the same jurisdiction. It cited an EU paper as stating: "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."

The document reportedly added that sanctions should be "appropriate in the context" of EU member states' 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."

Bloomberg BNA also reported the document as outlining three options for the application of sanctions: a flexible approach, a rigid approach, and a "toolbox" approach.

Bloomberg BNA said the document identified the "flexible" approach – under which the sanctions would be treated as a "menu" from which EU member states could choose – would allow "maximum flexibility but can perhaps be considered as complicated." By contrast, the EU could prepare a short list of countermeasures "adaptable to the national systems of all member states and suitable for all listed jurisdictions."

The final option would involve "the development of toolboxes of countermeasures that would be aimed at addressing specific issues." The document noted that this would allow the sanctions to be effectively targeted, and enable member states to develop new toolboxes as the need arises.

Bloomberg reported that 92 countries are currently being screened.

TAGS: compliance | tax | tax compliance | tax avoidance | royalties | offshore | legislation | tax planning | transfer pricing | withholding tax | European Union (EU) | Europe | Tax | Tax Evasion

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