The European Union placed the Virgin Islands on its blacklist of uncooperative tax jurisdictions on Tuesday, but the VI government quickly responded by suggesting that the territory doesn’t belong on the list because of a series of legislative reforms that took effect Jan. 1.
The VI joined Russia, Costa Rica and the Marshall Islands as new additions to the EU list, which was established in 2017 and now includes 16 countries and territories.
According to the EU, the list is updated twice a year using a monitoring process that screens countries and territories against international tax standards.
To that end, one of the EU’s major benchmarks is the Organisation for Economic Co-operation and Development’s Global Forum Peer Review, which assesses compliance with international standards of transparency and exchange of information on request.
The OECD Peer Review on the VI was launched in December 2021 and covered a period stretching from 2016 to 2020, Premier Dr. Natalio “Sowande” Wheatley said in a Friday House of Assembly statement issued in advance of the EU announcement.
“Having maintained a ‘largely compliant’ [OECD] rating since 2015, the [VI] was moved to a ‘partially compliant’ rating in November 2022 as the historical analysis focused on the review period and could not take into consideration important legislative developments in 2022 that would ensure the effective and efficient exchange of information,” Dr. Wheatley said Friday.
Now, he added, the VI government is requesting a supplementary review from the OECD Global Forum that considers recent reforms that took effect on Jan. 1, including 2022 amendments to the BVI Business Companies Act and related regulations.
“Following a supplementary review, the BVI is hopeful that it has complied with the requirements that would get approval for a ‘largely compliant’ rating to be reinstated,” he said.
The premier closed his statement by saying that the territory would remain a world-class international financial centre committed to high standards of transparency and regulation.
After the blacklisting was announced on Tuesday, the government released a similar statement reiterating Dr. Wheatley’s explanations.
Blacklist history
As in other OTs, leaders in the VI have long criticised the EU’s blacklists as arbitrary and misleading, maintaining that the territory’s financial services industry is tightly regulated in keeping with international standards.
But when the EU system launched in 2017, the VI was included on a grey-list of partially compliant jurisdictions said to be working toward reform.
In March 2018, the EU concluded that the VI, the Bahamas and Cayman needed further technical guidance from the EU and had until the end of 2019 to adopt local legislation, which resulted in the Economic Substance Act being rushed through the House of Assembly.
As a result, the VI was white-listed along with 16 other jurisdictions in February 2020.
Last January, however, the territory was downgraded back to the grey list.