Today’s Editorial June 24: Shades of grey

The Cayman Islands Government, led by Leader of Government Business McKeeva Bush, signed another Tax Information Exchange Agreement on Tuesday. The signing brought the number of tax agreements in place with other countries to 10.

The number is important because the Organisation for Economic Co-operation and Development has suggested there is threshold of 12 TIEAs for jurisdictions to acquire white-list status.

The Cayman Islands are on the OECD’s grey list, which means, according to the OECD, that although it has committed to co-operation and internationally agreed tax standards, it has not yet substantially implemented those standards.

Signing 12 TIEAs is one way to implement the standards. However, Cayman must now fear the seemingly ever-recurring problem of moving goalposts.

While the Cayman government is feverishly attempting to get its 12 TIEAs signed so it, like Bermuda, can move from the grey list to the white list, the OECD is apparently thinking about something more.

As Cayman was signing its TIEA with Ireland in Berlin on Tuesday, OECD Secretary-General Angel Gurria was saying somewhere else in Berlin that tax cooperation should not been seen as a TIEA ‘numbers game’.

Although we can’t say for sure what the Mr. Gurria and OECD have in mind, it quite possibly will mean Cayman won’t automatically ascend to the white list once it has 12 TIEAs in place. Perhaps it will require even more tax agreements – the moving goalposts – or perhaps it will require other concessions, which would be like a whole new playing field.

There is just no telling how far the OECD will go in its efforts to eliminate so-called tax havens.

Mr. Gurria indicated that governments need every dollar of tax revenue due to them, and that was part of the reason why transparency in the world’s financial markets was necessary. If the rules applied to all of the world’s financial markets, this approach would be fair enough. But it doesn’t; countries like the US and the UK get to play by a different set of rules. Unfortunately, it’s next to impossible for Cayman to win a battle of words with the US or UK, no matter how hard it might try.

That leaves little choice for Cayman but to toe the line and cave into the OECD’s demands, whatever they are, even if the goalposts change. Ultimately, if the Cayman Islands is going to survive as a financial services centre, it will have to do so as a completely transparent and cooperative jurisdiction, so we might as well head in that direction from now on.