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UK offshore jurisdictions protest after Netherlands puts them on tax 'blacklist'

07/01/2019 John Evans, international editor of thewealthnet,

The Isle of Man and the Channel Islands have protested against the Netherlands for including them in its own blacklist of low tax jurisdictions, pointing out the Dutch themselves have attracted criticism in the past for offshore-style taxation policy and profit relocation schemes.

Alfred Cannan, the Manx treasury minister said he was surprised by the move, saying it should have rather been a case of the Netherlands putting their own affairs in order rather than attack the Isle of Man.   

Guernsey's Chief Minister Gavin St Pier stressed that the island has been rated as fully compliant against international standards. In a statement he said the Netherlands was adopting a list that includes jurisdictions on the basis of the rate of corporate tax alone, specifically those lower than nine percent, and does not take into account transparency. 

“Guernsey was rated as fully ‘compliant’ by the OECD against the international standards relating to exchange of tax information on request in July last year. This is a rating that exceeds those of some EU Member States including the UK, Germany and Belgium; the Netherlands are yet to be assessed in the second round of peer reviews against the same criteria and currently are still rated as only ‘largely compliant’ which is a lower assessment than our own.”

In the Caymans, the Office of the Premier said the Dutch blacklist does not take into account Cayman’s adherence to international standards for tax transparency nor its participation with the OECD’s Base Erosion and Profit Sharing (BEPS) inclusive framework.

“It is unfortunate that the Netherlands has chosen to attempt to divert criticism of its own tax practices by attacking the legitimate tax regimes of other jurisdictions.”

The Dutch list, issued separately from the EU’s hit-list of low-tax locations, covered 21 jurisdictions, 16 more than the EU’s own. 

The EU’s list contains American Samoa, The US Virgin Islands, Guam, Samoa and  Trinidad and Tobago. While the Dutch list shows these same five jurisdictions, it also brands another 16 as tax havens, including the British Virgin Islands, Guernsey, Jersey, the Isle of Man, the Cayman Islands and the United Arab Emirates.

Anguilla, the Bahamas, Bahrain, Belize, Bermuda, Kuwait, Qatar, Saudi Arabia, the Turks and Caicos Islands and Vanuatu complete the list.

“By drawing up its own stringent blacklist, the Netherlands is once again showing that it is serious in its fight against tax avoidance,” Menno Snel, the Dutch State Secretary for Finance. “And that’s just one of the steps we’re taking.”

Dutch officials contend their list will help with the control of foreign companies and tax avoidance by preventing companies from moving assets to low-tax jurisdictions.

From January 2021, the list will be used to “implement a conditional withholding tax on interest and royalties.” As a result, companies that are registered in any of the jurisdictions present in the Dutch blacklist will be paying 20.5 percent tax on interest and royalties received from the Netherlands.

Lastly, the Dutch tax and custom administration will not issue transactions rulings with companies that have their headquarters in the blacklisted jurisdictions.

The Netherlands has come under criticism for operating a tax haven for international corporations, which use the extensive international treaty network of the country with 150 double taxation agreements to shift profits to low-tax jurisdictions.

The Netherlands received more than EUR4.5 trillion of foreign direct investment in 2017, most of which was channelled through shell companies to other jurisdictions like offshore centres.

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