The Cayman Islands is aiming to achieve the G-20’s top-rated roster of compliant financial centres within a matter of weeks, according to Government Ministers, escaping an intermediate ‘grey list’ of questionable jurisdictions.
We are confident that in relatively short order, now that the rhetoric has died down, that very quickly we will migrate to the ‘white list’,” Minister with responsibility for international financial policy, Hon Alden McLaughlin, told a national broadcast audience on Friday afternoon.
He was echoed by Leader of Government Business, Hon Kurt Tibbetts, who indicated the timeframe was likely to be a matter of weeks rather than months.
Pointing to a 1 April progress report on the Cayman Islands from the Organisation for Economic Cooperation and Development (OECD), on which the G-20 relies for advice on financial centres, Mr Tibbetts said that the organisation was evaluating George Town’s “unilateral mechanism” for tax information.
“The legislation is being reviewed by the OECD and once that is accepted it will put us well beyond what is required by the group, and so we will wait to see, but we should know in very short order, and we are very positive,” he said.
A statement from Maples and Calder, one of Cayman’s largest offshore legal firms, underlined Mr Tibbetts’ remarks, saying the unilateral mechanism had already been recognised by OECD members.
“We are pleased to see that the [OECD] decision to place the Cayman Islands on a list of jurisdictions that have committed to ‘internationally agreed tax standard[s]’ recognises the significant cooperation by the Cayman Islands,” the company wrote.
“Although the OECD is still reviewing the Cayman Islands legislation introducing the unilateral mechanism, and therefore chose not to include the unilateral arrangements in the total number of commitments that the Cayman Islands have entered into, several OECD member states have nonetheless already recognised the validity of the unilateral mechanism. Indeed, the German Government has announced that it is ‘in accordance with the standard laid down by the OECD’.”
Since 19 March, the Cayman Islands has either signed or ‘scheduled’ 19 tax-information exchange agreements (TIEAs) with OECD members, including the UK, Germany, Ireland, Holland, Belgium, Austria, Slovakia, the Czech Republic and the five Nordic nations, plus two Danish-administered territories.
However, 12 of the accords are under Cayman’s unilateral mechanism, created under a December amendment to the local Tax Authority Law. The mechanism allows George Town to select and notify foreign Governments of its desire to pursue TIEAs.
Because the amendment is so recent, the Minister explained, the OECD’s Harmful Tax Practices Committee had not yet reviewed it, meaning the Paris-based organisation currently recognises only eight Cayman TIEAs. Once approved, however, the other dozen accords will gain acceptance, placing Cayman solidly in OECD ranks of compliant, transparent jurisdictions.
Both Germany and Ireland have welcomed Cayman’s unilateral mechanism, saying it met all OECD standards.
The G-20 grey list came after the 2 April London summit of 19 of the world’s 25 most developed countries and the European Union to discuss the global economy. For months, major Governments, including the US, UK and France, have been under popular pressure to move against offshore ‘tax havens’, accused of allowing corporations to dodge taxes in their native jurisdictions.
The summit nearly sidestepped the highly charged political decision, but at the last moment decided to “take note” of an OECD blacklist, while creating a short ‘grey list’ of largely compliant jurisdictions that have committed to “internationally agreed tax standard[s]”, and a ‘white list’ of fully transparent financial centres.
Mr McLaughlin pointed out “obvious” anomalies in the G-20‘s various list, noting that both Hong Kong and Macau had appeared nowhere because of China’s overwhelming economic and political influence.
“The only offshore centres on the white list are the Channel Islands”, Crown Dependencies of the UK government, Mr McLaughlin said. The G-20 had discounted Danish-dependent territories Greenland and the Faroe Islands from Cayman’s list, “but they would have had to be included for Jersey and Guernsey to make the white list,” he said.
“The OECD has recognised the unilateral mechanism as progressive and innovative and as something they are prepared to support.”
He said, however, that the grey list was unlikely to have a significant local impact.
“It’s largely a competitive issue,” he said,” It does create an issue as far as the Crown Dependencies are concerned. It’s not fair and we should be on the white list, but I don’t think it will have any effect on life. If we had been on the blacklist it would have been a significant hit.”
He was particularly disappointed, however, that the UK, “our administering power”, had offered little support.
“We are on the verge of a bilateral negotiations, and have been talking for some time. They have said particular things to us privately, but they are not prepared to say them publicly, like the Germans have,” he said.
“So the Cayman Islands is about where we expected it to be. There are only three international financial centres on the white list and we are confident we will migrate to that last very quickly.”