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EU inches closer to establishing a pivotal beneficial ownership criterion for tax transparency

In a pivotal move to enhance tax transparency, the European Union is on the verge of a breakthrough. The focus? A critical beneficial ownership criterion aimed at unmasking countries outside the bloc that fall short in meeting international tax transparency standards. The chair of the listing committee, María José Garde, shared insights into this developing story in a recent testimony.

The Quest for Clarity: Developing the Beneficial Ownership Criterion

Since 2016, the EU has been on a quest to refine its tax listing process. The goal? To incorporate a beneficial ownership criterion into the existing framework. Garde, leading the Code of Conduct Group for business taxation, emphasizes the complexity yet necessity of this endeavor. The group's mission is to pinpoint jurisdictions deserving a spot on the EU's list of non-cooperative tax territories.

The Ongoing Journey: Challenges and Hopes

Garde, addressing the European Parliament's subcommittee on tax matters via videolink, shared the ongoing challenges faced in formulating this criterion. "It's a challenging journey," she admits, "but we're hopeful for a positive outcome in the coming months."

The List in Motion: Additions and Removals

The EU's list, updated biannually, saw significant changes last October: Antigua and Barbuda, Belize, and Seychelles were added, while the British Virgin Islands, Costa Rica, and the Marshall Islands were removed. The list serves not just as a catalog of non-cooperative jurisdictions, but also as a dynamic tool reflecting commitments to policy changes by various countries.

Beyond Tax Havens: A New Perspective

Garde clarified that the list is more than a mere catalog of tax havens. It's a reflection of active non-cooperation in tax matters. Some countries, often labeled as tax havens, have avoided the list by pledging to reform their policies.

A Future Shaped by Global Tax Reform

Looking ahead, the EU, along with other jurisdictions, is preparing to implement a 15% global minimum corporate tax from 2024. This initiative aims to ensure that large corporate groups pay a minimum effective tax rate in each country they operate in. Garde anticipates this development to be a key factor in future listing processes, following the implementation of the OECD's minimum tax agreement's Pillar Two.