Government seeks public recognition from UK officials
The Cayman Islands government has indicated to the British government that it is committed to joining the G5 pilot, announced in April by the UK, France, Germany, Italy and Spain, on multilateral automatic exchange of tax information.
The pilot is based on the model agreements negotiated by the five countries with the United States government to comply with the US Foreign Account Tax Compliance Act. FATCA forces financial institutions globally to report American taxpayers’ accounts and account balances to US authorities or face a 30 per cent withholding tax on transactions involving the United States.
The new initiative aims to provide the template for a wider multilateral agreement for the exchange of tax information between participating countries.
The UK overseas territory’s interest in joining the pilot was communicated to British Prime Minister David Cameron in a 25 April letter from Cayman Islands Premier Juliana O’Connor-Connolly.
Regarding the pilot, she wrote, “We welcome these efforts to promote an effective global mechanism for automatic exchange of information for tax purposes, in which all jurisdictions participate and where a common approach will not only ensure efficiencies of cost and resources, but will also avoid the risk of multiple competing standards.
“Accordingly, we would call on other jurisdictions to commit to this initiative, which will take us to a new level of tax transparency and remove hiding places for those who would seek to evade tax and dodge their responsibilities.”
Also in her letter, Ms O’Connor-Connolly told Mr. Cameron that, in line with the revised Financial Action Task Force recommendations and the recently issued methodology for assessing compliance with its standards and effectiveness, the Cayman Islands is committed to reviewing its legal and regulatory framework, including conducting a national threat assessment.
“The Cayman Islands has always taken a leading role in the fight against money laundering, terrorist financing and all forms of financial crime, as is evidenced by (our) consistent compliance with the standards,” she wrote.
Ms O’Connor-Connolly further noted that Cayman is “committed and determined to remain at the forefront of jurisdictions in respect of information and enforcement of standards”, such as those on availability of beneficial ownership information. Cayman will produce an action plan for the strengthening of its anti money-laundering regime, she said.
Given these significant commitments, Ms O’Connor-Connolly wrote, she hoped Cayman would receive “its fair share of recognition” from the UK government. This would include elected and non-elected British officials “publicly recognising the advanced level of commitment of the Cayman Islands to the global standard”.
“I have asked my officials to work rapidly with your treasury officials and press officers to construct the best possible position which will show that both our governments are in the forefront of tackling tax evasion and implementing transparency,” the premier wrote.
Cayman Finance, the private sector body representing the Cayman Islands financial services industry, said that Cayman, by expressing its commitment to join the multilateral tax information exchange pilot, is taking a clear stance on anti-evasion tax measures.
Cayman Finance said, in keeping with recent joint consultations, including Cayman’s approach to FATCA with the US and UK, the organisation supports and continues to work with the Cayman Islands government on this initiative.
“We are keen to work with the G5 as part of the group that will set a common standard, moving from TIEAs to a multilateral automatic exchange of information for tax purposes,” said Gonzalo Jalles, CEO of Cayman Finance, “and it is of particular importance to note Cayman is the only offshore jurisdiction currently committed to working with the group that will shape the outcome of this initiative.”
The multilateral element in practice will provide a single standard, based on the US agreements, aimed at minimising costs to business and government and the underlying policy, to implement automatic exchange of information to avoid a proliferation of multiple standards across multiple jurisdictions.
By joining the G5 pilot, Cayman is continuing its global commitment on the exchange of information for tax purposes. In the European Union, Cayman has been engaged in automatic exchange with EU member states, for the purposes of the EU Savings Directive, since 2005.
“Cayman has stood at the forefront of jurisdictions that take a tough stance on tax evasion for many years, for example by implementing the European Union Saving Tax Directive, Financial Action Task Force mutual evaluation, the peer review process of the OECD Global Forum on Tax Transparency and signing over 30 [tax information exchange agreements],” Mr. Jalles said.
Cayman’s commitment to the pilot multilateral automatic exchange of tax information, as well as to reviewing its legal and regulatory framework, follows months of discussions between its government and UK officials, in particular Her Majesty’s Treasury. These discussions were initiated by Cayman’s Ministry for Financial Services, after the UK announced it would seek similar automatic exchange of information arrangements as those made by its overseas territories with the US for FATCA.
Ministry officials were concluding a visit to London last week that centred on discussions regarding US and UK FATCA with HM Treasury and HM Revenue and Customs. During the visit, ministry officials also took the opportunity to discuss the UK’s G8 agenda with UK government officials.