In February 2020, the European Council issued the results of a progress review of tax jurisdictions and their progress toward delivering on commitments regarding the signing and ratification of the Convention on Mutual Administrative Assistance (“MAC”).
The purpose of the MAC is to provide for coordination amongst member states in the administration of tax assessment and collections. The MAC provides for both exchanges of taxpayer information, either upon request or automatically, and for assistance in the collection of monies or assets that happen to be within the supporting country’s jurisdiction for the settlement of taxes due in other cooperative jurisdictions. This Convention was originally proposed by the OECD and the Council of Europe in 1988 and updated via a protocol in 2010.
The MAC is but one part of a group of reforms undertaken by the EU and the OECD over the past thirty years to address issues of tax avoidance and tax evasion. EU member states and other Non-Member states having trade and economic relations with EU member states are expected to provide mutual support and assistance in the cross-border administration and collection of taxes. Each country is expected to demonstrate this commitment by signing and ratifying the MAC and implementing the provisions thereof. Failure to fulfill these obligations can result in a country being placed on the EU Blacklist and labeled as a “non-cooperative jurisdiction for tax purposes”.
The inclusion of a country on the blacklist may have implications for investments between non-compliant countries and their EU counterparts. While the exact nature of the restrictions has not been completely formalized, it is understood that companies and investors residing in EU member states will incur substantial reputational risks for investing in Blacklisted countries and that there may eventually be other financial or payment risks but these have yet to be finalized.
Thailand is currently on a watch list, (i.e., greylist) along with twelve other countries including: Anguilla, Australia, Bosnia and Herzegovina, Botswana, Eswatini, Jordan, Maldives, Mongolia, Namibia, Saint Lucia, and Turkey. These countries were recognized as having made “meaningful progress” towards meeting their obligations to implement the provisions of the MAC, yet they were all noted as not having formally signed and submitted the related instruments of ratification of the Convention. Accordingly, these countries were given specific deadlines for signing, 31 August 2020, and ratifying, 31 August 2021, the agreement or risk being moved from the greylist to the blacklist.
It is anticipated that Thailand will meet its commitments to avoid inclusion on the blacklist as a non-cooperative. Inclusion on the blacklist could impact on Thailand’s image as a center for trade and an EU investment destination. Thailand has expressed its intention to implement the provisions of the MAC through signing and ratification but these deadlines loom unfulfilled.
We will continue to monitor the progress of this Convention and will provide further updates on developments, as they arise.
While this document is updated on a regular basis, it has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice.
Head of Regional Tax Practice
Thailand Tax Director
Head of Regional Compliance & Investigations Practice