European Union Labels 17 Nations as Tax Shelters or Secrecy Jurisdictions
In a series of developments, US taxpayers and tech giant Google are facing financial consequences for non-compliance with international regulations.
While US taxpayers are still subject to US taxes on their worldwide personal income, even when conducting business through a Hong Kong company, the Corporate Transparency and Accountability Act aims to increase transparency and accountability in the financial dealings of multinational companies. Introduced by Rep. Mark Pocan (WI-D) on September 22, the Act requires country-by-country reporting (CBCR) for all publicly-traded multinational companies.
Meanwhile, Google has been accused of violating Russian law by not filtering out blacklisted sites. Russia's Internet and media watchdog, Roskomnadzor, has announced its intention to fine Google for failing to comply with the federal law requiring search engines to block websites that are blacklisted by the watchdog. This fine is not the first time Google has faced penalties for failing to comply with Russian internet regulations. The specific law being violated is Article 15-8 of the Federal Law "On Information, Informational Technologies and the Protection of Information".
The blacklisted countries by the EU, primarily due to strategic deficiencies in their anti-money laundering (AML) and countering the financing of terrorism (CFT) regimes, include Monaco, Venezuela, Algeria, Angola, Côte d'Ivoire, Kenya, Laos, Lebanon, Namibia, Nepal, and others. These countries have not sufficiently addressed the weaknesses in their AML/CFT controls as identified by the Financial Action Task Force (FATF) and the EU's technical assessments.
On the other hand, countries like the United Arab Emirates (UAE), Barbados, Gibraltar, Jamaica, Panama, the Philippines, Senegal, and Uganda, have demonstrated significant improvements in their AML/CFT regimes and have been removed from the blacklist.
The fine for Google in Russia is part of a larger ongoing effort by the Russian government to regulate the internet within its borders. The EU's blacklisting of countries is intended to pressure them into improving their tax and financial practices. The OECD insists that mandatory CBCR is crucial in fighting corporate shifting of profits overseas.
As for Hong Kong, the corporate tax rate is 0% for transactions outside Hong Kong. However, US taxpayers are still subject to US taxes on their worldwide personal income.
In response to the EU blacklist, Monaco acknowledged the update and expressed its commitment to taking necessary measures to be removed from both the EU list and FATF’s grey list in the short term. Many jurisdictions engage in consultations with the EU and FATF to improve their systems, often involving bilateral dialogues and on-site visits as part of the assessment and monitoring process. The EU closely monitors progress against action plans agreed with FATF to help listed countries fully implement required reforms.
These developments highlight the ongoing tension between tech companies and governments over internet regulation and censorship, and the importance of adhering to international financial regulations to prevent money laundering and terrorist financing.
In the context of global regulations, the Corporate Transparency and Accountability Act, proposed in the United States, targets increased transparency and accountability in the financial dealings of multinational companies, including businesses like Google. Meanwhile, Google is facing fines in Russia for not adhering to federal laws requiring search engines to block blacklisted sites, specifically Article 15-8 of the Federal Law "On Information, Informational Technologies and the Protection of Information". This fine is one of many penalties Google has incurred for non-compliance with Russian internet regulations.
