IRS tax initiative Cayman vows full compliance

Tax seminars to be held to aid in transition

A Cayman Islands delegation met with representatives of the US Internal Revenue Service on Wednesday to discuss the implementation of the Foreign Account Tax Compliance Act.

Premier McKeeva Bush led the Cayman delegation in meetings with IRS Deputy Commissioner (International) Michael Danilack and senior officials in the US Treasury Department.

The meeting took place in response to a letter from the Cayman Islands Government that outlined concerns about the required implementation of the tax act’s provisions. The IRS then invited representatives from the Cayman Islands Government and the financial services industry to 
Washington in order to hold further discussions.

Mr. Bush said Thursday that the meeting was “a fact-finding mission in order to gain a clearer understanding of the intentions and implications of FATCA”.

“Our pro-active approach was well received and we were able to share our viewpoints and some suggestions we have,” he said. “While it was made very clear to us by the IRS/US Treasury officials that this is not a matter which singles out the Cayman Islands, this is a matter which will impact institutions and practitioners, as well as individuals who are American citizens residing outside of the United States.”

The Foreign Account Tax Compliance Act was enacted in March 2010 as part of the Hiring Incentives to Restore Employment – or HIRE – Act. Under FATCA, US citizens and taxpayers holding financial assets outside the United States must report those assets to the IRS on a new form attached to their tax return. Reporting is required for taxable years beginning 1 January 2011 and penalties apply for failure to comply.

In addition, FATCA will require foreign financial institutions to report directly to the IRS certain information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest, or to face paying a 30 per cent withholding tax on payments made from US financial institutions to foreign financial institutions after 1 January, 2013. Non-US banks, trusts and investment funds are all included in the definition of foreign financial institution.

In order to avoid the withholding tax, foreign financial institutions will have to enter into an agreement with the IRS to, among other things, identify US account holders and report information about US accounts to the IRS on an annual basis. Should account holders fail to comply with the identification process, the financial institution will have to withhold 30 per cent of deposits made to the account holders and close their accounts. Mr. Bush said those they were meeting with recognised Cayman’s “strong history of cooperation and leadership in implementing tax information assistance to the United States”. He further indicated that cooperation would continue. “[W]e assured them that we would be seeking to ensure full compliance with FATCA once this comes into effect.”

To help provide clarity about the tax act to promote compliance, Mr. Bush said the government would offer a tax seminar in mid-April.

“We recognise that there are many questions about US taxes and we believe that our Government can assist by facilitating a tax seminar that educates those living and working in the Cayman Islands,” he said.

Speakers at the seminar will include representatives from Sidley Austin LLP, the Cayman Islands’ legal representatives in Washington DC, which assisted in arranging Wednesday’s meetings. 
“The access to key US Government officials, expertise on US legislative policy and advice to local people about US taxes are prime examples of the tremendous benefits the Cayman Islands are receiving from our international representatives,” Mr. Bush said.

While in Washington on Wednesday, the Cayman government representatives also met with senior Republican and Democratic staff from the Senate Committee on Finance, as well as the Senate Permanent Subcommittee on Investigations.

“It is always important to demonstrate that the Cayman Islands is a transparent jurisdiction and to draw US policymakers’ attention to the growing list of acknowledgements, endorsements and achievements, which we have received from various international organizations, regulatory bodies, and even US Government Agencies,” Mr. Bush said. “These meetings have achieved much and we will be seeking to build upon the momentum we gained from this visit to Washington, DC with follow-up visits.”

The Cayman Islands’ delegation included Attorney General Samuel Bulgin; Cayman Islands Monetary Authority Chairman George McCarthy; Ernst & Young Regional Managing Partner Dan Scott; Financial Services Deputy Chief Officer Samuel Rose; Senior Political Assistant Richard Parchment, as well as representatives from Sidley 
Austin LLP.

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12 COMMENTS

  1. Call me crazy. But what business is it of the US of A to know what’s going on in Cayman? To dare come to Cayman and say we need to see these people’s bank accounts!?

    I know that they are targeting those US citizens who have millions of dollars. But what right do they have to hunt these people down?

    Most of these millionaires already own companies in the US, that they pay more than thier fair share of tax within the US to the US government. Then these millionaires hire employees who work in those US companies, who also pay tax on thier salaries to the US government.

    So why does the US government think they have a right to those millionaires money? What? because they make too much money? None of thier business. Especially when that money is made outside of the US.

    If you make money in cayman, shouldn’t it be Cayman’s business if they tax that money being made by foreign investors or not. And not the US’s jurisdiction?

    Personally i feel it’s none of the US’s business if US citizens make money in foreign countries. I thought the US is free. It’s not that free, now is it!

    That is why most of us leave other countries to come here. We do not want to work for the government (ie heavily taxed to support a bloated bureaucracy). Here in Cayman, the government works for the people. As it should be. And this is the way the entire world should work.

    Long live Cayman!

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  2. They have every right to collect from those tax dodgers. We should not be penalized for them failing to do their civic duty, we already give them enough breaks, they need to pay their share especially since their country is involved in three war fronts. Cayman needs an IRS that way we would not have to sell our public holdings like the water department..

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  3. If the Money is made in Cayman it should stay in Cayman. The Cayman Islands government should Tax this money themselves. Why should they have to send it to the US when it was made in Cayman. The US government rapes their Citizens enough already. The Average Income Tax is about 30 percent of your Income and then you pay taxes on any property you own, that you purchased with hard earned money that has already been heavily taxed. You pay taxes on Groceries and Clothing as well as taxes on interest made from money you save. A long time ago the US fought a War against the British because they were against paying taxes only to turn around and do the same thing to their own citizens. The only people in the US that don’t pay taxes are people who don’t work or are on Welfare whom also get to live in Government subsidized homes What a way to penalize a people for being hard working.

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  4. The reason why many like Dart has given up their U.S. citizenship. The IRS is taxing people from left to right! People who come here to save and invest what they earn are being subjected to pay for the U.S. welfare state and military.

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  5. In response to Big Bird’s comment, Here in Cayman, the government works for the people. WE ARE SLOWLY SEEING THAT BECOMING A PUFF OF SMOKE! CAYMAN’S GOVERNMENT IS NOT ALL ABOUT THE PEOPLE’S INTEREST LIKE IT SHOULD BE!

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  6. Bodden…the day you actually pay taxes from your PAYCHECK. (without actually buying anything) Then you have a right to complain about the government.

    I personally think this government is one of the best in the world. Look what they have to work with. they must run an entire island, and services. Including free services for Caymanians, like healthcare. All on only 22 Percent collected on goods coming onto the island.

    That in itself is amazing.

    People in the US and Canada are so heavily taxed, they actually work for the government (ie, a couple who make a combined income in canada of 100K Canadian, are taxed 49% of that, they dont’ even get to touch it).
    That is what I mean, by working for the government.

    Here, the government works for the people, the people do not work for the government.

    PS. sometimes people in power within the government have to make hard choices. Because they see a bigger picture than you do. Sometimes that means going against the will of the people. Because most people don’t or cannot foresee the future. Ask the old time Caymanians, if there were complaints about an airport, a seaport and basically anything else that considers change on this island. The one thing this island is good as is complaining about change.

    If you think this island can stand still in time, as if it was 1970. Think again. If you use a bank card. You cannot say your against change. And the list of changes you use everyday can go on and on.

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  7. The fact is that as a US citizen, you are not free of the reach of the IRS. All US citizens MUST report their worldwide income (clearly outlined by the IRS, and it is even written in your passport!). This includes interest earned on bank accounts, etc. So, while I may hate the fact that I am subject to this scrutiny by the IRS, I am a law abiding citizen and I do what I am required to do by the laws of my land. If it upsets people so much, they need to work on changing the laws. But truly, many US citizens do dodge taxes and a great amount of money is laundered in places like Cayman (if there is a way to go around the rules, someone will find it!).

    Interestingly enough, there is only one other country in the world that requires citizens to report worldwide income–and that is North Korea. Kinda makes you wonder where the US is headed…

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  8. One of the most loved Presidents in US History made Comment that defines what it means to love your Country.

    Ask not what your Country can do for you, but what you can do for your Country.

    These ideals are clearly opposite of the Cayman way of life, where you have a people that want everything handed to them for free but are not willing to do their part.

    There a lot of issues that the Government could solve by directly taxing its citizens. Yet they are adamantly against this. Bush himself fought hard against direct taxation when the UK pushed for it in Cayman. This I call a government who must have the peoples best interest in mind.

    When you complain about new development and foreign investment, you need to remember that this is what keeps the government out of your pocket. Be careful Caymanians if you try to stop progress you may find yourself having to actually pay for your adversity.

    I’d like to see the Cayman Compass take a Poll to see how Many People would be willing to pay income and Property Taxes if it meant that there would be no need for things like Enterprise City, East End Seaports or Even Expats.

    Would you ‘Caymanian’ be willing to pay taxes to support your Government? Ask yourself would be willing to pay to keep Cayman the same.

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  9. @NJ2Cay – Direct taxation on the Cayman Islands would be a big mistake! Cayman’s system of indirect revenue-raising has been a key factor in the growth of the financial services industry. To introduced direct taxation would threaten Cayman’s future seeing that we have a government that spends more than it makes. Any direct tax system would put the Cayman Islands at a competitive disadvantage compared to other financial centers. Moreover, the funds needed for compliance of such a system – plus the hiring of tax collectors and need for new legislation, would be too costly. The only reason why the UK is pushing direct taxation on us, I think it is because they want to let us go – Independence. We have claim to have evidence of tax evasion here, and to start with the UK don’t need us! We can go on believing that they need us, but they don’t! Why you think we have a new constitution? Why you think they are pushing us on anti-corruption laws and transparency? Why you think they want direct taxation here? Why you think the UN is at them about our self-determination? It is all leading up to one day when they will say to us, so long, your on your own. That is why our local government need to strengthen and maintain our strong relations with the UK government. We need them more than they need us! And definitely we don’t need direct taxation – that would do more harm to us!

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  10. Interested bird. You just said it right there. You obey the laws of YOUR land. But here is the kicker and it trumps your theory. Where are you living right now? Cayman? Then the laws of the US land, do not apply here. Unless you are saying the US is more important or considers itself more important than any other place. So their laws supersede the countries laws you live in at the time.

    And that would be very arrogant.

    So as I stand by my rant. If you live in another country. It is up to the country you live it to impose taxes or claim taxes on money foreigners are making in their country. It isn’t any of the US’s business, if their people make money in foreign lands. They have absolutely no right to it. At all.

    If they want to stop people from making money in other countries, then they must stop people from being able to take out more than 10k from the US of A.

    Otherwise, the IRS should shut up. Lump it, and accept that this is a global world now. And they have no right to monies made in other countries.

    Greedy governments. It’s wrong.

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  11. You misread me Bodden, I to do not think direct taxation is the way to go, I just used it to show people why the Government has to bring in new business to the islands. And to make a point to people who constantly complain about the growth and new opportunities brought on by Development.

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