Blacklisting looms over different onshore, offshore tax rates – PM
The European Union is reportedly threatening to blacklist Antigua and Barbuda if it does not harmonise its tax rates for onshore and offshore financial services.
This is according to Prime Minister Gaston Browne who was speaking in the parliament on Tuesday during the presentation of the Automatic Exchange of Financial Account Information (Amendment) Bill.
Browne’s revelation comes days after the European Council of Finance Ministers published a list of 17 countries it regards as non-cooperative jurisdictions in taxation matters. Grenada, Barbados, St. Lucia, and Trinidad and Tobago were among those blacklisted.
Several Caribbean states that were affected by the September hurricanes, including Antigua and Barbuda, were given a reprieve to get themselves compliant.
According to an EU statement: “They will be asked to address the concerns identified as soon as the situation improves, with a view to resolving them by the end of 2018. By February 2018, they will be contacted to prepare the next steps.”
“The most recent situation is that the European Union … they are now stating that our tax practices in the offshore sector is harmful,” Browne told the House.
“So they’re saying where there’s a differential in the rate of tax in the domestic financial services sector and the offshore financial services sector, they’re making the argument that it is harmful to competition and have literally threatened us and have blacklisted other countries in the Caribbean ….”
But Browne argued that this development leaves his country between “a rock and a hard place.”
“If we were to eliminate, let’s say 23 percent on the domestic tax rate and reduce it to two percent, then we would see perhaps a $60 million reduction in revenue which the government certainly cannot afford. Now on the other hand, if we increase the offshore sector to 25 percent we may lose the entire industry. So we have … a serious dilemma which we’re not sure how we’re going to resolve this one,” Browne stated.
According to the PM, blacklisting may mean the country would no longer receive EU assistance. He added that the government will be arranging consultations shortly with the stakeholders, especially those in the offshore sector.
Browne said his government has complied with every request to date for amendments to local laws and he dubbed the latest move as punitive.
“I recognise that they are literally now eroding our sovereignty. We don’t have any right now to determine how we compete, whether or not we have a situation whereby the offshore sector is actually tax free or it’s low tax,” he said.
Browne said the other Caribbean countries may not have recognised as yet the threat posed by the EU’s attitude to the different tax rates for onshore and offshore financial services.