General — 16 March 2019 — by Rowland A. Parks
EU lists Belize as “non-cooperative jurisdiction for tax purposes”

BELIZE CITY, Thurs. Mar. 14, 2019– At a meeting of the European Union economy and finance ministers held on Tuesday, Belize was among 9 other countries that were placed on the list of countries listed as “non-cooperative jurisdictions for tax purposes.” Belize had failed to meet the agreed good governance standards. The other countries on the EU list are Aruba, Barbados, Bermuda, Dominica, Fiji, Marshall Islands, Oman, United Arab Emirates, and Vanuatu.

The countries on the list had up to the end of December last year to comply with the EU taxation stipulations and their domestic laws were monitored to ensure compliance, an EU press release said on Tuesday.

The EU press release said: “Those jurisdictions did not implement the commitments they had made to the EU by the agreed deadline.”

The press release added, “The list, which is part of the EU’s external strategy for taxation as defined by the Council, is intended to contribute to ongoing efforts to prevent tax avoidance and promote good tax governance worldwide.”

According to the EU press release, 11 of the countries had failed to pass the necessary reforms to deliver on their commitments.

The Government of Belize promptly issued a press release describing the action of the EU ministers as an “erroneous conclusion.”

“The Organisation for Economic Cooperation and Development (OECD) was assigned by the Group of 20 highly developed economies to set international standards of good governance. The Forum on Harmful Tax Practices (FHTP), an arm of the OECD, which includes Belize, the European Commission, the 15 EU member states, and 128 other jurisdictions, brings together all jurisdictions on an equal footing and already developed a list of jurisdictions deemed to be engaged in ‘harmful tax practices’ as part of a careful, inclusive, collaborative and consultative process,” said the Government of Belize press release.

The EU press release explained that “Work on the list started in mid-2016 within the Council’s working group responsible for implementing an EU code of conduct on business taxation. In November 2016, the Council agreed on the process to be followed and laid down criteria for screening third country jurisdictions, namely: what a jurisdiction should fulfil to be considered compliant on tax transparency; what a jurisdiction should fulfil to be considered compliant on fair taxation; that OECD anti-BEPS (tax base erosion and profit shifting) minimum standards are being implemented.”

The EU ended their press release saying, “The work on the EU list of non-cooperative jurisdictions is a dynamic process. The Council will continue to regularly review and update the list in the coming years, taking into consideration the evolving deadlines for jurisdictions to deliver on their commitments and the evolution of the listing criteria that the EU uses to establish the list.”

The Belize Government, however, explained in its press release on Tuesday, “The FHTP has reviewed several ‘categories’ of regimes across the 164 jurisdictions since 2015, and having joined the BEPS initiative, Belize’s International Business Companies Regime (IBC Regime) was similarly reviewed.  In its October 2017 report, ‘Harmful Tax Practices – 2017 Progress Report on Preferential Regimes,’ the OECD found that Belize’s IBC regime had potentially ‘harmful features’.  The Government of Belize subsequently gave an undertaking, that the IBC regime would be amended to remove its ‘harmful features,’ in accordance with FHTP timelines by 31st December 2018.”

The release continued, saying, “Via a  separate process, subsequent to the undertaking given by Belize to the OECD, the European Union Code of Conduct Group (COCG) had also invited Belize to provide ‘… high-level political level commitment…’ that Belize will address deficiencies also by 31st December 2018 or risk being included in the separate EU list of non-cooperative tax jurisdictions. By two letters dated 14th and 16th November 2017, Belize repeated its commitment to introduce legislation to address the FHTP-identified harmful tax practices of the IBC regime by 31st December 2018, and in addition committed to amend the Export Processing Zone (EPZ) regime by 31st December 2018 in order to comply with the criteria applied by the COCG.”

“In December 2018, the National Assembly adopted the International Business Companies (Amendment) Act, 2018, and the Designated Processing Areas Act, 2018, which respectively sought to remove the ‘harmful features’ identified by the OECD and/or the EU in these regimes. Consequential amendments were introduced via the Income and Business Tax (Amendment) Act, 2018, and the Stamp Duties (Amendment) Act, 2018, to bring IBCs and entities operating in EPZs into Belize’s income and business tax regime,” the government explained in its release.

The release added, “Having acted in good faith, Belize now finds itself unfairly and erroneously labelled by the European Union as a ‘non-cooperative tax jurisdiction’, via a process that contrasts starkly with the OECD’s inclusive and consultative methodology.  Indeed the rushed EU process can be characterised as non-consultative, inflexible and insensitive to the circumstances of small, highly vulnerable states such as Belize.”

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