On 1 February, the Code of Conduct Group Business Taxation of the Council of the European Union for transparency reasons published letters seeking commitments from the jurisdictions of Barbados, Belize, Curaçao, Mauritius, Saint Lucia and Seychelles to replace harmful preferential tax regimes with alternative measures. The letters identify preferential tax regimes which have been introduced in the jurisdictions which exempt foreign income from taxation, and ask that the jurisdictions abolish the regimes by the end of without any grandfathering mechanisms being introduced.
The letters indicate that should the regimes not be abolished, the Code of Conduct Group will revisit its recommendations to the Council of the EU as to whether the jurisdictions ought to be included on the List of Non-cooperative Jurisdictions for Tax Purposes. Ministers attending the ECOFIN meeting scheduled to take place on 12 February will discuss in detail the European Commission Roadmap which sets out a 4-step plan as to how decision making on tax matters could be modified to take place by way of qualified majority voting.
OECD issues information exchange rules for no-tax jurisdictions
It proposes to utilise the passerelle clauses contained in Article 48 7 and Article 2 of the Treaty on European Union to produce initiatives changing the scope of decision-making procedures. The Commission has called for the European Council, European Parliament and all stakeholders to launch an open debate on QMV in EU tax policy, and has invited leaders to endorse its Roadmap, particularly as concerns the use of the passerelle clause for Step 1 and 2 of its Roadmap, and consider the use of the passerelle clause in Step 3 and Step 4.
The OECD has released a new publication, called Harmful Tax Practices - Progress Report on Preferential Regimes, with results demonstrating that jurisdictions have delivered on their commitment to comply with the standard on harmful tax practices, including ensuring that preferential regimes align taxation with substance.
The report also delivers on the Action 5 mandate for considering revisions or additions to the FHTP framework, including updating the criteria and guidance used in assessing preferential regimes and the resumption of application of the substantial activities factor to no or only nominal tax jurisdictions. The report concludes in setting out the next key steps for the FHTP in continuing to address harmful tax practices. Over jurisdictions have joined the Inclusive Framework and take part in the peer review to assess their compliance with the transparency framework.
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The review of the transparency framework assesses jurisdictions against the terms of reference which focus on five key elements: i information gathering process, ii exchange of information, iii confidentiality of the information received; iv statistics on the exchanges on rulings; and v transparency on certain aspects of intellectual property regimes. Recommendations are issued where improvements are needed to meet the minimum standard.
This report reflects the outcome of the annual peer review of the implementation of the Action 5 minimum standard and covers jurisdictions. It assesses implementation for the 1 January - 31 December period.
The correct numbers should be: 68 jurisdictions did not receive any recommendations, as they have met all the terms of reference.
The report will be updated in January