The European Union has removed Namibia from the bloc’s blacklist of tax heavens after the country pledged itself to overhaul its tax rules and practices.
This decision by the European Union finance ministers has brought the list down to five non-cooperative jurisdictions: Samoa, Trinidad and Tobago and the three US territories of American Samoa, Guam, and the US Virgin Islands.
Namibia is now on a so-called grey list of countries with low tax transparency standards but which are aiming to improve, the EU said. The BVI is also on this list and working to avoid being blacklisted, as reported by International Investment.
The EU wants the BVI to show it has economic substance by ensuring the taxes it collects within the financial services sector were generated through real economic activity in the territory.
In other words, proof that an offshore company is paying taxes in the BVI because it largely does its work and earns its profits in/from the BVI.
In December 2017 the EU drew up a blacklist of jurisdictions whose tax rules and practices are deemed not in line with its standards. The list had initially included 17 countries.
Fair tax groups and EU lawmakers have criticised the rapid way the list has shrunk and say it also does not provide a complete picture of countries providing a jurisdiction for tax avoidance. EU countries are not at risk of being put on the list, which has also generated complaints.
Blacklisted jurisdictions face reputational damage and stricter controls on their financial transactions with the EU, although no sanctions have been agreed by member states yet.