(MENAFN - Khaleej Times) The UAE expressed surprise and dismay over European Union's decision to include the Emirates in a list of non-compliant tax jurisdictions, and said it expects to be removed from the list swiftly.
"We have committed to a reform process which will be finalised by October 2018, and we are absolutely confident this will ensure the UAE is swiftly removed from the list," the government said in a statement on Thursday.
On Tuesday, EU finance ministers adopted a blacklist of 17 jurisdictions, including the UAE and Bahrain, deemed to be tax havens, following a year of negotiations, singling out countries that EU officials accuse of facilitating the creating of shell companies and other structures designed to aid tax avoidance.
Yousef Haji Al Khouri, Undersecretary of the Ministry of Finance, said the UAE has worked to meet the EU's requirements in terms of exchanging tax-related information. "We look forward to moving into the next phase of cooperation with our EU partners on the important issue of tax regulation."
Al Khouri pointed out that the EU had acknowledged that the UAE has addressed each issue that has been raised, and that the UAE has drafted, legislated significant reforms to ensure that they remain in "lock-step" with partner countries in the Organisation for Economic Cooperation and Development and international best practice.
The only remaining issue in the case of the UAE is the implementation of the BEPS (base erosion and profit shifting) minimum standard, which the UAE has committed to finalising in October 2018 and ratifying in March of the following year, giving the UAE's federal structure the time necessary to ratify the measure across all seven emirates.
BEPS is an agreement signed by some OECD member countries to tackle tax avoidance strategies that allow multinational companies to shift profits artificially to low or no-tax locations.
The statement said the UAE stand by "this realistic timeline," adding that it was confident of being recognised as an internationally compliant tax jurisdiction at the EU's next review.
EU ambassador Patrizio Fondi said the placement in the list must not be seen as the end-game. "On the contrary, the exercise is ongoing and remains a matter of cooperation between partners."
According to reports, a further 47 countries on the blacklist may no longer be used by EU institutions for international financial operations, and transactions involving them could be subject to closer scrutiny.
Gary Dugan, former chief investment officer of National Bank of Abu Dhabi, said the timing of the UAE being placed on the blacklist was surprising, as most banks in the Dubai International Financial Centre and in the onshore market had already cleaned up their books in the last few years.
"This will make some of the European private banks nervous, and might tighten their compliance even more to make sure they don't get on the wrong side of a fine," he was quoted as saying.
Central Bank of the UAE officials were not available on Thursday for comment on the development. The UAE Banks Federation officials were also not available for comments.
Issac John Associate Business Editor of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.