Liechtenstein, Monaco, Andorra, Jersey and Guernsey quizzed in TAXE II
Representatives from Liechtenstein, Monaco, Andorra, Jersey and Guernsey were quizzed by Parliament's Special Committee on Tax Rulings II on Monday and Tuesday. MEPs criticised the jurisdictions for their low level — sometimes 'zero rate' — of corporate taxes and probed their representatives on the non-disclosure of company ownership in their jurisdictions.
Most of the representatives denied their jurisdictions were tax havens and said they comply with the highest international standards and will adhere to the OECD action plan against aggressive corporate tax planning.
Jersey and Guernsey both apply a zero percent corporate tax rate, their representatives confirmed. This is because the Islands don't want to discriminate between resident and non-resident companies, but also because they consider themselves 'international finance centres' which act as "financial entrepôts" facilitating the investment of funds drawn from around the world into European financial markets, Jersey's representative explained. But other jurisdictions were also criticised for their low corporate tax rate. Liechtenstein only applies a 12.5 percent rate, but the representative for that Principality denied it is an economy solely based on the financial sector saying it also had a highly developed and innovative manufacturing sector.
"Not tax havens"
Most representatives rejected suggestions that their jurisdictions were tax havens. The Liechtenstein representative told MEPs that like Andorra and Monaco, the principality adhered to the highest international standards on tax transparency and cooperation. Lichtenstein had been an early adopter of international obligations against tax avoidance, she said and cited its adherence to new international standards on the automatic exchange of information and the OECD's anti-Base Erosion and Profit-shifting (BEPS) framework — this measure is designed to combat the gaps and mismatches in tax rules which allow corporations to shift profits to low or no-tax locations so they pay little or no overall corporate tax. This was echoed by other representatives.
The representative for Andorra was challenged by one MEP on the 900 business which had moved to the Principality since 2013. She rejected the suggestion that this was because of the low corporate tax rate and said her country's taxes were "in line with best practices." She pointed to the recently-signed agreement with the EU on the automatic exchange of tax data due to start in 2017 and also Andorra's involvement with the working group on the anti-BEPS framework and its agreements to avoid double taxation. "Everything has been open and on the table," she said.
Beneficial owners of companies not disclosed
None of the jurisdictions present discloses information on the ownership of companies, although some jurisdictions say they are looking at changing this. The representative of Guernsey said it was also aiming to have a secure registry in place by 2017. Currently, the Island has no register of beneficial ownership, but Guernsey companies have to have resident agents. In contrast, Jersey has a company register, but the information is not open to the public "as it is not required at the moment" its representative said referring to international standards.