On 2
December 2019 Gerald Darmanin, French Public Accounts Minister, announced that France
is adding Anguilla to its blacklist.[1] It appears this will come into effect on 1
January 2020.[2] The
present list includes Panama, Trinidad and Tobago, the US Virgin Islands, and
twelve other countries. Now, they will add
Anguilla, the Bahamas, the British Virgin Islands and Seychelles.[3] This French blacklist is additional to the EU
list, which does not include Anguilla.
But
why is Anguilla being put on the French blacklist when the EU appears to be
satisfied with our compliance?
Generally,
reasons for being on a European blacklist include classification of the country
as an offshore regime; lack of tax transparency; base erosion and profit
shifting (BEPS) measures; or failure to investigate foreign aid fraud. Although we do incorporate IBCs, we have not been
a significant offshore regime for years.
More tax-free companies are formed in the State of Delaware or the City
of London in a day than are formed in Anguilla in a decade. Our taxes are heavy and transparent. Anguilla signed on to BEPS in March 2018, and
since then we have continued to implement BEPS minimum standards. We have received no request to investigate
foreign aid fraud.
Being
on the French blacklist will result in certain additional punitive measures. These include an enhanced withholding tax
rate of 75% and rebuttal of application of the French participation exemption
regime. If you are a Frenchman living in
Anguilla, your dividends will be taxed at 75%.
There will be a direct impact on your relationship with the French
banking sector. Your French bank will
not permit you to transfer money that you need to live on, to pay your
children’s school fees, or to conduct your business. French tourists will not be able to access
their funds through a local ATM or pay their restaurant and hotel bills with
credit cards.
Other
measures will include new liabilities for e-commerce platforms; enhanced
penalties in relation to tax fraud cases; a ten-fold increase in penalties for
auditors, banks, tax lawyers, tax advisers and other intermediaries accused of
helping to put into effect certain fraudulent schemes and operations (and the
burden of proof is shifted to the intermediaries to prove their innocence); the
introduction of a naming and shaming process; and new plea and transactional
procedures in tax fraud cases.
Jurisdictions
can get added to the French blacklist if they do not provide information
quickly enough, thus complicating tax investigations. Or, the information provided may be
insufficient. France has been carrying
out investigations into 500 companies following the Panama Papers scandal which
exposed illegal practices in the offshore finance industry. It seems 15% of the 500 cases were registered
in Seychelles.[4] It is not known what percentage, if any, were
registered in Anguilla.
All
efforts to find out from official sources the reason for Anguilla being on the
blacklist have proven futile. Some
insight may be derived by looking at the published information concerning other
French blacklisted countries.
Panama
was originally on the French National List of Uncooperative States and
Territories (ETNC), but it was removed in 2012 when it became fully compliant
with EU demands. It was returned to the list
in 2016 after the release of the Panama Papers.
Despite the efforts of its government to explain that the Panama Papers
is ancient history, it remains on the ETNC.
The
official reason for including Seychelles on this list is the lack of
information about some companies previously requested by French tax inspectors. It is not known whether Anguilla has failed
to respond to information requested by the French.
In
2017 American Samoa and Guam were added to the EU blacklist for failing to
apply automatic exchange of financial information; not signing and ratifying
the OECD Multilateral Convention on Mutual Administrative Assistance in Tax
Matters; not applying the BEPS minimum standards; and failing to commit to
addressing these issues by 31 December 2018.
They got themselves removed from the blacklist but have now been
reinstated. Presumably, this is because
they failed in their undertakings. It is
not known if Anguilla is in the same category of failure.
The
official reason France has given for adding the Bahamas to the blacklist is its
failure to respond to requests for information in a manner that is satisfactory
to them. Yet, there is not a single
French tax-information request to the Bahamas that remains outstanding or that
has not been dealt with. Additionally,
France has announced this action while failing to invoke the dispute-resolution
process contained in the relevant Convention.[5] The Bahamas Minister of Finance has been
raging against France’s announced move.[6] What is the point in us engaging in these
multilateral organisations if individual members take unilateral action without
dialogue?[7]
Could
the answer to the question at paragraph two above be that, because we have no
direct income tax, we are thought of as a tax haven, an offshore regime? Never mind that our customs duties, other
indirect taxes, government fees and public utility charges are among the
highest in the world! Everything we
consume must be imported from outside.
Just last month, the Water Corporation of
Anguilla increased the cost of using 999 gallons from $40.00 to $72.98. With new environmental levies imposed on us,
even the air we breathe now seems to be taxed.
Could
it be our failure to implement a register of beneficial ownership? The Europeans have long threatened the
British for failing to force us to establish such a register. Meanwhile, a 2018 study by Transparency
International reveals that the project is a failure in Europe.[8] While companies in Europe are obliged to
enter names on the register, no G20 country is properly implementing the
High-Level Principles on Beneficial Ownership.
No European country has the capacity to verify the information on their
register. Without the ability to do
this, the information by itself is useless.[9] What, other than bullying, is the point of
imposing this on Anguilla.
We know that Boris is responsible for
making any declaration of war on Anguilla’s behalf. But elections and Brexit have him distracted. Meanwhile, can we ask our Premier to tell
Gerald Darmanin to stick one of his new Barracuda-class submarines where it
hurts? At least, threaten him with a yellow
vest!
Whatever
we do, it appears there are more woes in sight next year for Anguilla’s
embattled banking and financial system.
[5] Tw wit, the Multilateral Convention on Mutual Assistance in Tax Matters, which The
Bahamas signed in late 2017 to facilitate tax-information exchange and cooperation.
