The Cayman Islands on Wednesday (8 July) signed its 11th tax information exchange agreement, leaving it only one short of compliance with international requirements, although recent statements by global financial leaders indicate a shifting view of the required standards.
Meanwhile, the tiny European Grand Duchy of Luxembourg announced, also on Wednesday, that it had moved off the Organisation of Economic Cooperation and Development (OECD) “grey list” of non-compliant countries after signing its 12th tax information exchange agreement (TIEA), the country’s Budget Minister Luc Frieden said.
On Wednesday, as Cayman’s Leader of Government Business and Minister for Financial Services, Hon McKeeva Bush, signed the Cayman Islands’ latest TIEA in the Dutch capital of The Hague, Luxembourg announced a protocol to its double-taxation convention with Norway and its accession to the international white list of fully compliant jurisdictions.
“As of this afternoon Luxembourg will be on the OECD tax haven white list,” Mr Frieden said. “This is very good news for the financial centre of Luxembourg.”
The Minister said additional negotiations with Germany were well advanced and that he hoped to have 15 agreements in place by the end of the year.
Luxembourg is the second country, after Bermuda, to escape the grey list since the 2 April summit of Group of 20 industrialised nations accepted the OECD roster. The Cayman Islands led the list, already having eight of the required dozen TIEAs, while Bermuda had only three and Luxembourg none at all.
Mr Bush has conducted a flurry of tax-treaty negotiations since his 20 May election, signing with the UK, Ireland and Holland during a 13-25 June European tour, while completing talks with Germany, Australia, Mexico, Italy and New Zealand. Negotiations with France and Portugal were “very advanced”, he told a 29 June session of the Legislative Assembly.
Cayman’s 12th TIEA could be signed with New Zealand in the next few days while Mr Bush remains in Europe, according to some speculation. As Cayman approaches its 12th TIEA, however, signs are emerging from Paris that the OECD is backing away from a straightforward recognition of 12 agreements, suggesting that it may ask its Global Forum on Taxation subsidiary to scrutinise of the “quality” of the accords.
A 23 June Berlin conference of OECD Ministers called for a “multilateral, impartial and transparent monitoring and peer-review process of all jurisdictions that ensures effective implementation of the standards on a global basis.”
The same ministers also agreed that jurisdictions failing to achieve compliance standards by a certain deadline would face international sanctions, which could include termination of treaties between non-cooperative jurisdictions and others already accepted by the OECD.
While the conference did not name the deadline, Chairman of the Cayman Islands Financial Services Association Anthony Travers suggested earlier this week that it may be 10 March next year.
Signing the Dutch TIEA, Mr Bush said the pact offered “a further affirmation of the commitment of the Cayman Islands, as well as the Kingdom of the Netherlands, to the openness and transparency that characterise the way business operates in these two jurisdictions.”
“It also demonstrates our willingness to partner with other countries to discourage those who are so minded to, from seeking to evade their obligation to pay their taxes to their respective jurisdictions,” he said.
“The Cayman Islands have repeatedly reassured the rest of the world that we provide no safe harbour to those who are involved in any unlawful activities be it tax evasion, money laundering or any form of transnational criminal activity.
“We pride ourselves as a major international financial-service centre that guarantees high standards of services underpinned by internationally recognised and accepted levels of regulation,” Mr Bush said.
OECD Secretary-General Angel Gurria said the 12-TIEA threshold was not just a “numbers game”.
“All countries must aim to have high-quality agreements which are effectively implemented with all interested countries. It is for this reason that the Global Forum will strengthen its peer-review process to focus on effective implementation of the transparency and exchange information standards,” he said.
The Global Forum will meet on 1st-2nd September in Mexico.