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EU Warns St. Lucia About Its Preferential Tax Measures

THE European Code of Conduct Group (CCG) has sent out letters to six jurisdictions asking them to update their preferential tax measures or risk being blacklisted.

Saint Lucia is one of the six jurisdictions in which a letter was sent to. The other jurisdictions are Barbados, Belize, Curaçao, Mauritius, and the Seychelles. They all have been asked to commit to replacing their respective ‘harmful’ tax practices and seek alternative measures, if they don’t want to find themselves in the revised ‘tax havens’ blacklist, set to appear later this year.

It was reported that Prime Minister Allen Chastanet received the letter at the beginning of this month cautioning the government to abolish its preferential tax measure by December 31, 2019 as it seems to benefit foreign companies working here.

The EU thanked the prime minister for complying with amending or abolishing the tax regimes it had considered harmful in December of 2017 but said that a new preferential tax measure exemption of foreign income had been reviewed by their Code of Conduct Group and was found to have similar harmful effects as the harmful regimes that St. Lucia had abolished at the end of 2018.

The EU letter to Prime Minister Chastanet stated that the EU would welcome to receive a commitment at a high political level that Saint Lucia would amend or abolish its tax regime by December 31 of this year without any grandfathering mechanism. And should Saint Lucia oblige, the Code of conduct group will not recommend to the Council of the EU to include Saint Lucia in the EU list of non-cooperative jurisdictions for tax purposes.

The Code of Conduct Group further claimed that the tax regime is overall harmful as it is ring-fenced to transactions carried out with non-residents.

The first version of the blacklist was published in 2017; and several jurisdictions, including Jersey and the Isle of Man, were included on a so-called grey list and had to rush to amend their tax measures by the end of 2018.

All six finance centres listed above were included on the grey list.

The EU has come under fire for not including any member states on either the black or grey lists.

While the original 2017 blacklist focused on concerns about tax transparency, fair taxation and Beps erosion, the 2019 one will include preferential tax measures.

Some jurisdictions have already started an intensive review of their tax measures, but had included grandfathering provisions, forcing the CCG to rule them out.

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