The Cayman Islands’ legal and regulatory regime was found in compliance with all nine essential elements of international tax transparency and exchange of information standards, as set by the OECD Global Forum for its Phase 1 assessments.
An initial report in 2010 had found a generally “well developed legal and regulatory framework” in the Cayman Islands but noted some shortcomings with respect to the retention of accounting records for companies, partnerships and trusts.
Changes to a number of laws since the peer review report was issued have addressed most of these concerns.
The Global Forum has as a result updated its assessment in a supplementary report that also recognises five new tax information exchange agreements signed by the Cayman Islands.
Premier McKeeva Bush said the supplementary report highlighted Cayman’s enactment of the Companies (Amendment) Law, 2010; the Partnership (Amendment) Law, 2010; the Exempted Limited Partnership (Amendment) Law, 2010; and the Trusts (Amendment) Law, 2011.
“These amendments, which were in response to findings outlined in the Phase I report, assist government in meeting the international standards on tax information exchange,” said Mr. Bush, who also is the minister of finance.
Cayman Islands’ commitment noted
The OECD acknowledged on its website that “the Cayman Islands has moved quickly to address the shortcomings identified in its 2010 review in respect of the availability of accounting records” and the Global Forum concluded that “changes rapidly introduced by the Cayman Islands since (its 2010 Phase 1) report demonstrate its commitment to implementing” these tax information transparency standards.
The Cayman Islands Attorney General Samuel Bulgin noted that the Global Forum adopted the Phase I report on Cayman’s regime in September 2010. In July 2011 a Cayman delegation, led by Mr. Bulgin, presented the supplementary report on the Islands at the Global Forum Peer Review Group meeting held in Grand Cayman.
Mr. Bulgin said the amendments prescribe the keeping of relevant accounting records, including underlying documentation, for a minimum period of five years.
Furthermore, the supplementary report reflects the Global Forum’s removal of the recommendation in respect to nominees and the availability of ownership information.
The supplementary report also notes Cayman’s continued development of its information-exchange network, through the signing of tax information-exchange agreements.
Cayman has signed TIEAs with 25 jurisdictions. Mr. Bulgin pointed out that following the 2010 official dissolution of the Netherland Antilles, Cayman subsequently has been credited with having separate agreements with the countries of Curaçao and Sint Maarten. Of these agreements, 13 are in force.
Recommendations
Some Global Forum recommendations concerning the availability of ownership and identity information remain and these will be considered in the phase 2 review of the Cayman Islands, scheduled to take place in the second half of 2012.
These recommendations refer to the lack of penalties in certain cases for companies and partnerships for noncompliance with obligations to maintain ownership and identity information. The absence of appropriate sanctions is of particular concern, the supplementary report said, “given the number of unregulated mutual funds operating in the Cayman Islands, which are not subject to other information retention measures”. In those cases, effective sanctions should be introduced.
Identity and ownership information may also not consistently be available for all express trusts with respect to which Private Trust Companies and individuals carrying on trust businesses, act as trustees, the report said.
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