Cayman ‘lighter shade of grey’

Government leaders said they were disappointed but not surprised by news the Cayman Islands had avoided an international blacklist of tax havens, only to be included on a grey list.

‘We belong on the white list and we have done all of the things that need to be done to be on [it],’ said Cabinet Minister Alden McLaughlin, who has responsibility for international financial services policy.

‘We have every confidence that we will migrate to the white list in relatively short order.’

Released after last week’s G20 summit in London, the grey list groups the Cayman Islands with 38 other countries that the Organisation for Economic Cooperation and Development says have committed to the internationally agreed tax standard, but have not yet substantially implemented it.

Four countries were blacklisted for not having committed to international tax standards, while the OECD placed 40 other countries on a white list of cooperative jurisdictions.

Importantly, the grey list did not take into account 11 tax-sharing agreements that Cayman Islands officials recently signed with European governments, leaving Cabinet ministers confident that Cayman will soon be elevated onto the white list.

Leader of Government Business Kurt Tibbetts noted the Cayman Islands currently has the highest number of tax information sharing agreements among all of the grey-listed countries.

‘We believe that the Cayman Islands is cast in the ‘lightest shade of grey’ among the financial centres with which we have been listed,’ he said at a Friday press conference.

While blacklisting could have had dire consequences for Cayman’s most lucrative industry, Mr. McLaughlin is confident there will be no negative impacts stemming from being on the grey list.

‘Given [that] most of our competitors are there as well, I don’t think it’s going to make a great deal of difference,’ he said.

Mixed reaction

Financial service providers had mixed reactions to the outcome.

In a statement, Maples and Calder said it was pleased with Cayman’s inclusion on a list of jurisdictions committed to internationally agreed tax standards, but said the firm is looking forward to the territory being moved onto the white list once the OECD review is complete.

However the Cayman Islands Financial Services Association expressed anger the OECD had been swayed by ‘overblown empty rhetoric of a number of G20 politicians engaged in the exercise of blame deflection’.

CIFSA Chairman Anthony Travers said, ‘We had trusted the OECD to undertake a rational objective analysis, but what has occurred is consistent with its early history of arbitrary and prejudicial determination.’

Mr. Travers questioned whether the government had been too trusting that good faith efforts in establishing tax transparency would be given proper recognition.

‘Now that it is clear that cooperation in tax matters is neither recognised nor valued, perhaps there should be debate about withdrawing all cooperation in tax and other matters,’ he said.

‘If the OECD cannot be trusted to act in a non-arbitrary, non-prejudicial manner, then there are a number of other alternatives open to the Cayman Government,’ he said.

Government leaders also hit out at the amount of politics that intruded on tax-list decisions. They were particularly sceptical about how the three crown dependencies – Guernsey, Jersey and the Isle of Man – made it onto the white list and how the Chinese Territories of Macau and Hong Kong escaped classification altogether.

International news reports suggested the two Chinese financial centres only escaped listing after a last-minute deal between French and Russian officials.

‘We believe … that territories like the Cayman Islands got traded for Macau and Hong Kong not being listed at all,’ said Mr. McLaughlin. ‘They couldn’t appear anywhere else properly than on the blacklist, so they are just not listed at all.’

However, China is listed on the OECD’s white list with a footnote that states ‘excluding the Special Administration Regions, which have committed to implement the internationally agreed tax standard’.

UK let us down

Mr. McLaughlin was excited about the level of support the Cayman Islands received from surprise allies such as Germany and Ireland, following negotiations of tax sharing agreements with them recently.

But the UK’s refusal to publicly endorse the Cayman Islands’ efforts has frustrated Mr. McLaughlin and his Cabinet colleagues.

‘The thing that is missing from this whole picture is that the United Kingdom could not find it possible to make a similar statement supporting the efforts of Cayman,’ he said.

‘They have said complimentary things privately, but they have been unwilling to make public statements that other countries like Germany and Ireland and the OECD secretariat have been prepared to do.

‘That is very, very disappointing given they are our administrative power,’ he said. ‘It’s regrettable that that didn’t occur.’

PPM defended

With talk of the ruling People’s Progressive Movement government’s efforts to safeguard Cayman’s financial services industry having become a hot election campaign topic, Mr. McLaughlin defended his government.

‘We are satisfied that everything that could have been done was done, in the context of the present environment in which the G20 summit occurred,’ he said.

‘While the Leader of the Opposition can say ‘you all should have signed lots of these agreements before’, ask him … how many agreements were signed when he was Leader of Government Business and the answer you will get, if he answers truthfully, is zero.’