EU’s Efforts to Prevent Tax Avoidance and Evasion

As every taxpayer knows, part of the EU’s efforts to prevent tax avoidance and evasion is the infamous blacklist—a list of countries that are on notice with the EU Code of Conduct Group due to loopholes in their tax regimes.

For taxpayers, it pays to keep track of the blacklist as it’s not just bad news for countries, but also difficult for companies who invest in them. European companies with operations in blacklisted jurisdictions may have a difficult time getting public funding (goodbye grants! so long, loans!).

The good news is a country can move off the blacklist once it corrects the problematic tax issues identified by the Code of Conduct Group. Each year, the Group adds and subtracts countries based on their efforts to ensure that taxpayers pay their fair share of tax.

Blacklist and Gray List

This year, though, there are no changes to the blacklist—which currently consists of American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the U.S. Virgin Islands, and Vanuatu.

The gray list—a string of not-quite-sure-what-to-do-with-you countries—however, is growing. The Code of Conduct Group will add Russia thanks to the preferential tax treatment the government grants to holding companies. Israel, Vietnam, and Tunisia will also be added because they haven’t ironed out their country-by-country reporting framework.

According to the Group, Turkey requires more transparency to leave the list and so it will remain in the gray area until it shares more information with EU member states or fails to, in which case it will find itself in the black.