EU Considers Listing US as Tax Haven

Looking for a Tax Haven?  Maybe the Answer is in the United States!

The European Commission is developing a list of jurisdictions that are considered to be risks for tax avoidance.  They are in the process of updating this list and the United States has been flagged as a risk in the area of tax good governance.

To be fair, the United States enters the list as one of 90 countries that the EU views as potential problems, and in 2017 the EU will winnow that list down to its final resolution.  Only 160 countries were initially assessed so more than half the world is subject to this next-level EU scrutiny.  Countries are identified based on three risk factors:

  • Transparency of the tax system (this seems to be focused more on automatic exchange of information on tax rulings and the automatic exchange of information between tax authorities, as opposed ot making taxation easy to understand)
  • Tax advantages for corporations
  • No corporate income tax or zero-percent income tax

The United States was identified in two out of the three categories: Transparency and corporate tax advantages.

This is just the first step in a three step process.  Now that the European Commission has produced a scoreboard of indicators, they still need to engage in screening and listing.  Under the screening process, EU Member States will identify nations that must be formally screened by the EU.  This screening will include a dialogue between the EU and the country in question, to allow the country to react to any concerns raised (perhaps this could be considered in any tax package that the new Administration proffers).  Then, when the screening process is complete, nations that refused to cooperate or engage with the EU regarding tax good governance concerns would be put on the EU list of ujsidictions without good tax governance.  Presumably this could lead to EU impediments against transfer of funds to or from those tax havens.

The EU will create a map that shows a full consolidated overview of countries and territories ‘listed’ by Member States for tax purposes.  The US is unlikely to be listed on the final list of bad actors, but it is unclear who may finally make that list.  It will be important to gauge whether this effort impacts international payments for members of the aerospace community.

A full review of the EU work program for this effort is available online.

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