Government is monitoring reports that the Virgin Islands will be added to the European Union’s grey list of “non-cooperative tax jurisdictions” along with Bermuda, Israel, Russia and others, Premier Andrew Fahie said during a Feb. 11 press conference.

The censure would represent a significant setback after the territory rushed through economic substance legislation at the end of 2018 in order to meet EU requirements on tax reform.

The EU Observer, a nonprofit news site based in Brussels, reported that the EU is expected to add the four countries to its list today, according to a draft version seen by the site on Feb. 9. The EU has hinted for some time that it would seek to modify its requirements for the list, the last iteration of which was announced last October.

In total, the number of countries on the list is expected to increase from 15 to 25, according to reports.

Countries included on the list are judged by the EU to have failed to keep promises on tax reform.

VI response

At the press conference, Mr. Fahie was tight-lipped about any potential actions government may take in response. Instead, he said only that the situation was being monitored.

“We have been doing so much work to ensure that we stay within the boundaries of where we are supposed to be. We do not see sometimes how things are measured, especially for small island states. It is what it is, and you will be hearing more about that,” he said. “We are monitoring if it is so and to see if it has been a leak that it may be so or it may not be so. So we can’t take chances and make statements unless it is announced in that way. We are doing our work in the background to make sure we get to the bottom of this matter, and we will be reporting to the public accordingly.”


Meanwhile, the EU Observer reported that tax-reform campaigners are already applauding the news.

Chiara Putaturo, a campaigner with the non-profit Oxfam, praised the move, but complained that the Cayman Islands reportedly is not among the jurisdictions set to be added to the grey list.

“If the [new] grey-listing … is confirmed, we will see some real tax havens finally at risk to be blacklisted [in the future],” she said. “However, there are still other tax havens that are left off the hook, … such as the Cayman Islands, because the criteria remain weak.”

The EU made its last changes to the lists in February and October 2021.

As of Monday, the grey list included Anguilla, Barbados, Botswana, Costa Rica, Dominica, Hong Kong, Jamaica, Jordan, Malaysia, North Macedonia, Qatar, Seychelles, Thailand, Turkey and Uruguay.

The blacklist currently includes American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the United States Virgin Islands, and Vanuatu.

Speculation about this territory’s potential addition to the list began in February 2021, when the European Parliament passed a resolution calling for a measure that would automatically blacklist British territories like the VI, the Cayman Islands and the Channel Islands that have a zero percent corporate tax rate — and that now have a weakened voice in the EU in the wake of the United Kingdom’s split from the organisation.

The EU’s resolution at that time called on the council to “include the automatic listing of third jurisdictions with a zero percent corporate tax rate or with no taxes on companies’ profits as a standalone criterion.”

It did not mention the VI at the time. However, that announcement came before the revelation that nearly two thirds of companies named in the far-reaching Pandora Papers investigation last year were based in the VI. Panama, which is already on the EU blacklist, was host to the second highest number.


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.

Nevertheless, the VI was grey-listed along with other jurisdictions in 2017. In March 2018, however, the EU concluded that the VI, the Bahamas and Cayman needed further technical guidance from the EU and had until2019 to adapt local legislation,which resulted in the Economic Substance Act beingrushed through the House ofAssembly in late 2018.

Thanks in part to thismove, the VI was white-listed,alongside 16 other jurisdictions, in February 2020.

Although Cayman passed new legislation at the end of January 2020, it appears the move came too late, with the EU stating that the territory “does not have appropriate measures in place relating to economic substance in the area of collective investment vehicles.”

Thus, Cayman remained onthe blacklist before beingmoved to the white list in October 2020.