In positive economic news for Costa Rica, the European Union has removed our country from its list of tax havens. The EU’s updated blacklist, approved on Tuesday, now consists of 16 “non-cooperative” jurisdictions for tax purposes.
Costa Rica had previously been included on the EU’s list of tax havens since it was created in 2017. However, amendments recently made to Costa Rica’s foreign income exemption regime were enough to get us removed from the blacklist this time around. Specifically, changes were made to eliminate “the harmful aspects” of how foreign-sourced income was treated.
By taking steps to improve transparency and cooperation on tax matters, Costa Rica has managed to get itself back in the EU’s good graces. This is a major accomplishment that removes the stigma and potential sanctions that come with being labeled a tax haven.
However, the work is not over. Other countries in Central America and the Caribbean remain on the EU blacklist, including Panama, Barbados, and Trinidad and Tobago.
Moreover, humanitarian groups like Oxfam have criticized the EU’s list as being ineffective and arbitrary. Major economies like the United States and United Kingdom are not screened or included, even though they have tax rules that can enable evasion.
Costa Rica sets an example in the region for proactively addressing the EU’s concerns over tax rules. But more progress is still required, both locally and abroad, to clamp down on tax evasion by wealthy individuals and corporations. Tools like public registries of company ownership should be considered.
For now, Costa Rican officials will celebrate this EU decision as an endorsement of our commitment to transparency. It removes a potential barrier for European investment and cooperation as well. But vigilance is required to ensure we never again enable tax avoidance behavior. This EU decision gives Costa Rica added motivation to continue leading on tax fairness.