Ambassador Pierre Fournier’s explanation as to why France has blacklisted Vanuatu is interesting. His explanation is quite simple. If the EU has blacklisted Vanuatu, then France must blacklist Vanuatu.

What is not stated is that the reason Vanuatu is on the EU blacklist is because it appears in one (and only one) of the 3 EU’s criteria. That one is “facilitating the creation of offshore structures or arrangements“. Vanuatu is the only country in the world which is so characterized by France in spite of being able to create offshore companies in many jurisdictions. The result is that France treats Vanuatu the same as all other blacklisted jurisdictions in all financial matters.

It is also not disclosed that members of the European Union and the USA are exempt from the rules the EU applies to all non-EU members. Why does such a self-serving rule exist?

Because Vanuatu is economically so small, it gets discriminated against by the big countries such as France. They do not have to justify the moral basis of why a person resident in their country is obliged to pay taxes on the income earned in another country. The big countries avoid this by having agreements between themselves (double taxation avoidance agreements) that relieves their tax residents from paying tax twice. Economically weak countries don’t have this advantage.

Justice dictates that tax should only be paid in the country where the economic activity takes place and the economic activity receives the social services of that country e.g. police, health, defence, roads, airports etc.

It is true that the economic activity does not take place in Vanuatu by Vanuatu offshore companies. But economic activity does take place somewhere on-shore for those companies and is subject to tax in accordance with that on shore country’s laws. After the taxes are paid where the profit is earned, the profits come out to places like Vanuatu. Why should they be taxed again or why should the beneficial owners in countries such as France have to include such profits in their income and pay tax on them? They have already been assessed for tax.

The answer given is “because that is the law in France”. True, but on what moral basis was such a law passed? Clearly the economically powerful countries are taxing the profit out of emerging countries. Admittedly to some extent they give back aid to the weak countries which allows the strong countries to pat themselves on the back for helping the weak countries.

There is no justification for a country to tax profits made in another country. Territorial tax is defendable. Worldwide tax is not.

The question for France is: why doesn’t it treat countries such as Vanuatu the way it treats its fellow members of the EU? And why is the USA not treated as other non-EU countries? The answer appears to be “Might is Right”, but we in the weak countries know that is not fair and we know we are being discriminated against.

Tom Bayer

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