Representatives from Cayman Islands Government signed a double taxation agreement with the United Kingdom on Monday.
The agreement moved Cayman closer to meeting the Organisation for Economic Co-operation and Development’s requirement of 12 tax treaties in place in order to move from its grey list to its white list.
The double taxation agreement between the UK and Cayman is the first of its kind to be signed by the Cayman Islands and protects against the risk of an individual or a corporate entity being taxed twice on the same earnings.
‘We are very pleased to sign this agreement with the United Kingdom today as part of the Cayman Islands continued commitment to high standards of international cooperation and transparency,’ said Leader of Government Business and Minister for Financial Services McKeeva Bush, who signed the agreement on behalf of the Cayman Islands.
After the signing ceremony, U.K. Financial Secretary to the Treasury Stephen Timms commented that information exchange is a vital tool ‘in ensuring that governments receive the revenues they need to resource the essential public services on which we all depend.’
‘I would like to congratulate the Cayman Islands Government for signing up to an arrangement which includes unprecedented provisions for tax information exchange that meet international standards of transparency,’ he said.
Chairman of the Cayman Islands Financial Services Association Anthony Travers’ reaction was positive, but he had some reservations on how Mr. Timms later portrayed what had transpired.
‘Obviously CIFSA is very pleased with the progress achieved by [Chief Secretary George] McCarthy and the Cayman Islands Government team lead by Minister Bush, and they are to be congratulated in taking a proactive approach and accelerating the bilateral treaty issue,’ he said.
‘We anticipate further positive developments in the next few days which should render this whole white/grey list episode something of an historical footnote,’ Mr. Travers said. ‘However, we are less than pleased with the reported comments of Stephen Timms, financial secretary to the Treasury, in the Guardian, which we have no doubt are a mischaracterization of what he said.’
The Guardian quoted Mr. Timms saying that the agreement with the Cayman Islands would enable the Treasury to demand tax information from Cayman, and that Mr. Timms said “It has been a closed door until now.’
The Guardian also reported Mr. Timms said the new agreement included “unprecedented” provisions for exchanging information, something with which Mr. Travers disagrees.
‘It would have been wrong for him suggest that this treaty is anything other than another step in a protracted political process,’ said Mr. Travers.
‘It is most certainly not the case given the 20 unilateral and bilateral treaties that Cayman has had in place to date together with the 27 treaties under the EUSD that Cayman had hitherto been a’ closed door’ on the subject of tax transparency. To the extent that this mischaracterization may persist in some quarters, CIFSA will deal with it proactively.’
Former CIMA chairman Timothy Ridley was also supportive of the new agreement.
“We should all be very pleased to see the signing of the double tax agreement with the UK,’ he said. ‘It has been under negotiation for some considerable time. This agreement… will send a strong signal to Cayman’s detractors – both inside and outside those organisations – that our longstanding commitment to implement OECD standards on information exchange in tax matters is real and not merely hypothetical.’
Mr. Ridley said Cayman must press for its due international recognition for signing the agreement.
‘It is to be hoped that similar agreements will follow swiftly with other key jurisdictions to protect our competitive position from the growing risk of attrition of quality business for reputational reasons.’
The Cayman Islands maintains nine bilateral tax information agreements with the following countries: United States, United Kingdom, Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden.
The Cayman Islands delegation, which was led by Mr. Bush and Governor. Stuart Jack, also included Cabinet Minister Julianna O’Connor-Conolly; Chief Secretary George McCarthy; Financial Secretary Kenneth Jefferson; Ministry of Financial Services Chief Officer Carson Ebanks; Michelle Bahadur; Richard Parchment, Langston Sibblies and Paul Byles.
Mr. Bush said on Saturday that he intends to sign further tax agreements with France and Ireland on this trip and that he hoped to get something in place with Germany.
With regard to getting Cayman off the OECD’s grey list and onto its white list, Mr. Bush said he wasn’t sure when that would happen.
‘We’re working hard on it,’ he said. ‘I think we’re getting close.’
The agreements being signed are similar to what other offshore financial centre jurisdictions are signing, Mr. Bush said.
The OECD has demonstrated its ongoing commitment to the issue with the announcement that this week the director of the OECD’s Centre for Tax Policy and Administration will be presenting the latest developments in the OECD’s work to improve transparency and the exchange of banking information for tax purposes, ahead of the OECD’s annual forum and ministerial meeting in Paris being held 23-25 June.