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Vanuatu Prime Minister Charlot Salwai and Minister of Finance and Economic Management, Gaetan Pikioune, have expressed their disappointment over the approaches taken by the European Union (EU) Code of Conduct Group (COCG) to finally downgrade Vanuatu from its Grey list to the recent black lists status.
While the Government acknowledges the assessments done by the EU, the processes in which the assessments were carried out were not clearly communicated to the National Government who is working tirelessly and jointly with the OECD Secretariat to address the OECD requirements.
On February 2019, the EU Finance Ministers met in Brussels to update the EU list of non-cooperative tax jurisdictions.
They resolved and concluded that Vanuatu and other countries in their lists have not taken sufficient and necessary steps in fulfilling their taxation commitments and thus sanctioning them to be black-listed. According to the EU, Vanuatu was required to remove tax concessions that apply onlyto international companies and ensure that all relevant businesses in Vanuatu have a substantial economic presence in the country.
The substantive economic presence requirement will potentially have significant impact directly on international companies as it will effectively eliminate “shelf companies”.
The EU requirements implies that Vanuatu will need to develop a “real” financial centre reliant only on active businesses with a physical presence in Vanuatu if it wishes to continue to have an offshore financial centre.
This will involve a Country by Country Reporting to address issues concerning the base erosion and profit shifting standards required by the EU.
The Vanuatu Government expressed its concern over the EU’s self-imposed requirements without giving sufficient time and relevant support to the affected countries including Vanuatu to expand and diagnose their internal taxation regimes in compliance with the EU’s standards.
In his statement, PM Salwai said EU’s recent publication of Vanuatu on the EU Black-list on taxation matters can have greater ramifications on national economy and development and thus it is not a matter to take it lightly.
The publication was unwelcome and from the EU approach is not following the formal ways of communication through the Vanuatu’s Embassy in Brussels.
“Further, the country has not received the usual formal communique from the EU COCG Secretariat about possible dates and timeline. All we know is that EU has given us a dateline of 31st of December 2018,” he said.
Prime minister Salwai further expressed his deep concerns with the adverse effect, including the damage to the reputation on the Vanuatu economy and the unilateral approach adopted by the EU Finance Ministers in this matter.
Vanuatu is fully aware that the ACP-EU Cotonou Partnership Agreement, Article 12, directed the EU to inform member countries of the ACP, including Vanuatu through their formal representation, of any measure that EU intend to take that might affect the interest of ACP Member States.
On that understanding EU’s unilateral decisions and the pressure placed on Vanuatu to implement international tax good governance principles, could possibly seemed to operate outside this principle understanding.
“To this end, as Prime Minister of the Republic of Vanuatu, I wish to inform that for the most part, Vanuatu being on the EU’s list, is also largely compliant with the international tax good governance requirements of the Organisation for Economic Co-operation and Development (OECD),” the Head of the Vanuatu Government said.
“Furthermore, the Vanuatu Government has already made commitments to the EU to implement international tax good governance principles. To this end, considerable political, legislative and legal efforts will put into practise, which will mean painful economic and social repercussions to our economy, despite constraints in terms of capacity, resources and time’.
“This is something that this current Government and future Governments will need to commit itself to and manage for the betterment of this beautiful nation in order to preserve Vanuatu’s own identity globally at the same time obligate itself to internationally recognised best practices.
“My Government through its Competent Authority wishes to express its commitment to international tax good governance in view of the importance of tax matters to Vanuatu and is willing to find solutions with the EU regarding its list of non-cooperative tax jurisdictions and to strengthen its cooperation in international tax governance, within the framework of Vanuatu-EU cooperation.
“I believe the source of the problem is often the inequitable decision-making processes and the EU clear lack of communication about its intention on taxation standards to be adopted by other jurisdictions including Vanuatu in alignment with the good governance rules.”
With this in mind, Prime minister Salwai said his council wishes to see developments in advancing the discussions on the OECD and EU tax matters through its appointed sub-Committee of the National Coordinating Committee chaired by the Director General of the Prime Minister’s Office.
“The NCC will engage collaboratively with the OECD and EU on all tax matters, in light of the current listing with the ultimatum to achieving better outcomes,” he said.
“In light of the current developments that are already underway, as the Prime Minister of the Republic of Vanuatu and in a true spirit of mutual trust, invite the EU to remove Vanuatu from its list of non-cooperative tax jurisdictions to not re-list Vanuatu as it continues to strive towards its July dateline to amend, draft and pass new legislations when the national Parliament next meet, and to engage collaboratively as soon as possible, in order to resolve this matter. The Vanuatu Competent Authority will advance the discussions on this matter and is ready to meet the EU Secretariat when it next meet in the immediate future,” he said.
SOURCE: VANUATU DAILY POST/PACNEWS
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