UK overseas territories could face EU tax sanctions

Eight British overseas territories and crown dependencies could face EU economic sanctions for tax evasion, the Guardian reported on Friday.

Anguilla, Bermuda, the British Virgin Islands, Cayman Islands, Guernsey, Isle of Man and Jersey have been flagged up for their low tax rate, which can attract companies or individuals seeking to avoid or evade European taxes.

Experts in Brussels have published a scorecard showing a list of 81 countries with red flag warnings, which will be whittled down to a shortlist of countries selected for further screening after discussions among member states.

The EU Commission is currently discussing which sanctions to impose on the countries on the final list, due to be published by the end of the year. Options include the introduction of additional taxes, known as “withholding taxes” or the removal of tax deductions.

“This would make it much less attractive for companies to invest or do business in these jurisdictions” said the European commission in a paper published in January.

Pierre Moscovici, the European commissioner for economic and financial affairs plans to reform behaviour inside the EU by adopting a more coordinated approach to how member states tax multinationals.

Brussels hopes that this coordinated move by EU member states would send a strong signal of Europe’s determination to address tax avoidance and evasion.

These plans known as the common consolidated corporate tax base (CCCTB) have faced resistance by both Ireland and the UK.

Treasury minister, David Gauke said: “The CCCTB has been around a very long time. It is a proposal still looking for a justification.”

The UK’s ability to influence discussions about which jurisdictions make it on to the final tax haven list however will be limited following the Brexit vote. Britain has previously fought hard to protect the interests of its overseas territories and crown dependencies.

Supporters of the policy, on the other hand, feel the UK’s exit from the EU will remove an obstacle to the major tax policy reform.