A little more than four months after appearing on the Organisation for Economic Development and Co-operation’s grey list, the Cayman Islands graduated to the white list on Friday.
To get there, the Cayman Islands had to sign 12 Tax Information Exchange Agreements, a process culminated when Leader of Government Business McKeeva Bush signed a TIEA with New Zealand last Thursday.
For now, the Cayman Islands can breathe a little easier because it is listed along with 45 other countries as a jurisdiction that has substantially implemented the internationally agreed tax standard. The big question, however, is whether the agreed tax standard will stay as it is or expand to more criteria, the so-called moving goalposts.
Although there is some debate on this, there is a good chance the OECD and the industrialised countries will want even more from offshore financial centres in the future. Some would argue that the TEIAs aren’t really effective means of preventing tax avoidance and for that reason they think the OECD will press for more active forms of co-operation from offshore financial centres.
Indeed, Cayman’s move to the white list comes with a footnote that its approach to broadening its tax co-operation is being reviewed by the OECD. In addition, the OECD has said that at the Global Forum in Mexico in two weeks it will strengthen its peer review process to focus on effective implementation of transparency and information exchange standards.
This all means that the public and private sectors of the Cayman Islands need to continue to work toward a paradigm of attracting business here that is not trying to avoid taxes elsewhere.
Cayman’s financial industry has faced challenges before and has always managed to overcome them through innovation. Everyone must once again work together to come up with new ways of dealing with this even bigger challenge.