Grey list goalposts shift

As the Cayman Islands signed the 11th of 12 bilateral tax agreements necessary to be removed from a grey list of offshore financial centres, European leaders are moving the goalposts on what requirements are needed to move onto the white list.

CIFSA dinner

Manuel Ortiz, left, and Jack Quinn, right, of Quinn Gillespie and Associates with Anthony Travers.
Photo: Normal Connolly

UK Prime Minister Gordon Brown and French President Nicolas Sarkozy at a meeting in the French town of Evian on Monday said they wanted an eight-month deadline for the imposition of sanctions on tax havens.

“The world should be in no doubt that the writing is on the wall for tax havens wherever they may be,” said Mr. Brown. “So we are calling today for a March 2010 deadline for the introduction of sanctions against tax havens.”

The call came as Cayman’s Leader of Government Business McKeeva Bush prepared to sign with Holland the Islands’ 11th tax information exchange agreement. Mr. Bush signed the agreement at The Hague Wednesday.

The Organisation for Economic Cooperation and Development, a Paris-based think-tank of the 30 most developed countries, stipulated in April this year that jurisdictions that did not meet certain standards of transparency needed to sign at least a dozen bilateral tax agreements before they could be removed from the grey list.

Late last month, Angel Gurria, the OECD secretary general, said that signing of these agreements was ‘not just a numbers game’ and may not be enough to qualify removal from the grey list. He said countries may need to undergo a peer review before being transferred onto the white list.

Mr. Brown, expanding on what sanctions could be included for offshore centres, spoke of imposing taxes on funds in tax havens or the withdrawal of aid. “From today that countdown has begun,” he warned.

At a dinner for financial services professionals at the Ritz Carlton on Tuesday night, chairman of the Cayman Islands Financial Services Association Anthony Travers was upbeat that Cayman would meet the criteria set down by the OECD before the next meeting of its Global Forum on Transparency and Information Exchange on 1 and 2 September in Mexico.

‘We have to be circumspect about the OECD’s approach. Mr. Gurria has already said … that there will now be a new subjective element to the determination of whether a sufficient number of bilateral treaties are in effect and operating.

‘Nevertheless, if we have more treaties than any other offshore jurisdiction with OECD countries, there is no doubt in terms of the current concern, we shall prevail. I hope to be able to do so prior to the next meeting of the OECD in September, and well before March 2010 deadline now announced by Mr. Gordon Brown and Mr. Sarkozy.’

In April, the OECD placed Cayman, along with more than 30 others, on a grey list of jurisdictions that had committed to internationally agreed tax standards, but had not yet substantially implemented them and, thus, were not considered sufficiently transparent.

Bermuda and Luxembourg are the only two jurisdictions to have completed the signing of 12 accords since April and to have been moved to the white list.

The Cayman Islands Financial Services has hired political lobbyists Quinn Gillespie and Associates to fight its corner in Washington, DC, to prevent US policymakers from taking steps against Cayman’s offshore financial industry.

Jack Quinn, co-founder and chairman of Quinn Gillespie and Associates, who spoke to industry players and government officials at Tuesday night’s dinner, said that while his chief aim was to get Cayman’s message across on Capitol Hill, he also wanted to help ‘make sure this OECD drama ends right now’.

‘I get nervous sometimes that OECD people might move the goalposts on us, and there are hints of that already as we hear talk of the OECD wanting not merely a dozen bilateral treaties, but a record of compliance and executable commitments made in those treaties,’ he said.

‘One can’t help but get the feeling that the closer we get to the carrot, the further they might pull it away,’ Mr. Quinn added.

Speaking at the signing the agreement with the Netherlands, Mr. Bush 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 trans-national 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.’

As well as Holland, Cayman now has bilateral tax information exchange agreements with Ireland, the US, UK, Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden.

“The world should be in no doubt that the writing is on the wall for tax havens wherever they may be. So we are calling today for a March 2010 deadline for the introduction of sanctions against tax havens.” – UK Prime Minister Gordon Brown

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