The European Union has added Russia to its blacklist of tax havens after the country amended its business legislation in a way the bloc considers detrimental and unfair.
The breakdown in dialogue between the EU and Russia due to the invasion of Ukraine prevented the tax frictions from being resolved, ministers noted.
Swedish Finance Minister Elisabeth Svantesson, whose country holds the EU Council’s rotating presidency, said the decision was not based on a “political reason,” despite the particular timing, but rather on a technical assessment that proved Russia had “failed” to address the harmful elements of its legislation.
Those elements relate to the income from intellectual property and so-called “grandfathering provisions,” which allows business entities to follow old rules instead of new ones.
The EU Council did not immediately reply to a request for further explanation.
What is the EU’s tax blacklist?
First adopted in 2017, the EU’s tax list is updated twice a year.
Brussels insists the public catalogue is not meant to “name and shame” other countries, but to “encourage positive change” in tax practices through cooperation and continued dialogue.
Countries around the world are assessed against three key criteria: tax transparency, fair taxation, and measures to tackle base erosion and profit shifting (BEPS) by multinationals.
Those who don’t comply with the criteria are asked to make changes to their legislation.
If they refuse to do so, the EU can add them to the list, which doesn’t use the politically charged term of “tax haven” and instead speaks of “non-cooperative jurisdictions.”
The labelling doesn’t entail any reprisals or sanctions beyond the reputational damage.
The EU’s blacklist has often been the target of criticism from tax experts and civil society organizations, who argue its scope is far too limited and fails to target member states, such as Luxembourg and the Netherlands, that present characteristics of tax havens.