Further progress in countering harmful tax practices !

Jurisdictions continue making progress on implementing the international standard under BEPS Action 5 to address harmful tax practices, as the OECD/G20 Inclusive Framework on BEPS releases new results on preferential tax regimes and substantial activities in no or only nominal tax jurisdictions.

Preferential regimes

At its November 2022 meeting, the OECD Forum on Harmful Tax Practices (FHTP) reached new conclusions on 13 regimes as part of the implementation of the BEPS Action 5 minimum standard on harmful tax practices. The results are as follows: two regimes were found to be not harmful (Cabo Verde and Hong Kong (China)), four regimes are now in the process of being amended (Armenia) and two regimes have been amended to be in line with the standard and are now not harmful (amended) (Jamaica and North Macedonia). Furthermore, two regimes are abolished (Honduras and Pakistan), and two regimes were concluded as potentially harmful (Albania) for which the FHTP will assess at its next meeting if these regimes are actually harmful.

Since the start of the OECD/G20 BEPS Project tackling international tax avoidance, the FHTP has reviewed close to 320 regimes, which are concluded as follows:

Annual monitoring of substance in no or only nominal tax jurisdictions

As part of the standard on substantial activities requirements in no or only nominal tax jurisdictions, the FHTP undertakes an annual monitoring exercise to assess whether the standard operates effectively in practice. The FHTP started this exercise in 2021 and now has agreed on the conclusions for the second monitoring year.

Recommendations for substantial improvement were made for four jurisdictions (Anguilla, the Bahamas, Barbados and the Turks and Caicos Islands) and areas for focused monitoring were identified for another four jurisdictions (Bahrain, Bermuda, the British Virgin Islands and the Cayman Islands). No issues were identified for Guernsey, Jersey, the Isle of Man and the United Arab Emirates.

The next annual monitoring exercise for no or only nominal tax jurisdictions will take place in the second half of 2023. More information on BEPS Action 5 on harmful tax practices can be found at https://oe.cd/bepsaction5.