The Cayman Islands will sign its twelfth tax information exchange agreement (TIEA) on Thursday, 13 August in Washington, DC, with New Zealand, potentially opening the way to placement on the “white list” of internationally approved financial jurisdictions.
“We hope to have a decision in Mexico in September.”
Should the unilateral mechanism gain Global Forum approval, it will boost Cayman’s TIEA count to 21, even while rendering redundant unilateral agreements with the UK, Ireland and Holland subsequent to 16 June, 23 June and 8 July bilateral treaties with the three countries.
However, Global Forum approval could validate earlier unilateral agreements with Austria, Belgium, the Czech Republic, Germany, Japan, Luxembourg, Slovakia, South Africa and Switzerland.
Chairman of the Cayman Islands Financial Services Association (CIFSA) Anthony Travers was nonetheless dubious about the unilateral mechanism.
“The unilateral mechanism is something of a problem child in that the OECD are clearly sceptical of it and are likely to introduce significant additional qualifications to its acceptance that may outweigh the benefit,” he said.
“In the event Cayman will have what should be, on any rational analysis, more than sufficient number of bilateral TIEAs by the time of the OECD meeting in Mexico to qualify for the highest level of recognition on transparency,” Mr Travers said.
Mr Bush said on Thursday that bilateral negotiations had reached “advanced stages” with Italy, Mexico, Germany, France, Australia, Portugal and Canada.
The recent move off the “grey list” by Bermuda, Luxembourg and Belgium has sparked fears, however, that the OECD may seek further qualifications from aspiring jurisdictions, including a “peer review” of TIEA implementation.
In late June, OECD Secretary-General Angel Gurria told a gathering of European Ministers that “all countries must aim to have high-quality agreements which are effectively implemented with all interested countries”.
Mr Bush dismissed fears, however, that Cayman might be denied accession to the “white list”.
“I realise there are some concerns being aired regarding the possibility of the OECD moving the goal post, so to speak, or that the stated number of 12 agreements may be changed. However, based on the discussions I have had with OECD officials, this is highly unlikely,” he said.
Mr Travers welcomed the New Zealand signing, but cautioned about new challenges to the financial services industry in the immediate future.
“The OECD has mentioned an analysis of the functioning of TIEAs as being a new criteria, but if that is a new test Cayman, is in a better position than most other jurisdictions in having a fully staffed and fully functioning Tax Information Authority with a verifiable record of compliance under both the United States treaty and, of course, the European Union Savings Directive,” he said.
Other issues included the effect of the European Union directive on alternative fund management and a possible US compromise bill on offshore jurisdictions.
“It is highly likely if the European Directive proceeds in its current form that Cayman will need to undertake a fundamental repositioning of its fund industry and rethink current marketing initiatives,” Mr Travers said.
“That said, however, a strong body of opinion in the United Kingdom seeks revision to the draft proposals although the UK Government has no right of veto over EU directives and generally has seen the threat too late in the day.
“This is an area which CIFSA is following closely,” Mr Travers said. “Both should now be regarded as more critical issues than the ‘white list’, which has, for all intents and purposes, been effectively dealt with.”