The Cayman Islands government confirmed Friday, 7 June, that it is prepared to join the Convention on Mutual Administrative Assistance in Tax Matters.
The convention is a multilateral agreement developed by the Organisation for Economic Cooperation and Development and the Council of Europe to combat tax evasion and aggressive tax avoidance. It provides for all possible forms of administrative cooperation between states in the assessment and the collection of taxes.
“Cayman has engaged in substantive discussions with HM Treasury on the particulars of the convention,” said Premier Alden McLaughlin. “We are satisfied that the extension of the convention to our islands will be done in accordance with the UK’s recognition of Cayman’s fiscal autonomy, and the well-established principle that countries have the prerogative to set their own tax rates.”
He noted that committing to the convention is in line with Cayman’s extensive network of bilateral exchange of information agreements. This includes commitments to US and UK FATCA; the European Union Savings Directive; and the G5 pilot on multilateral automatic information exchange.
“We agree with the UK’s statement that there is no point in dealing with tax evasion in one country, if the problem is simply displaced to another,” the premier said. “With this in mind, we also agree that there should be equitable adherence, including within the G8 countries, to global tax and transparency standards. This will set the foundation for full and effective participation, by all countries, in the true spirit of these efforts.”
In contrast to the 31 bilateral OECD tax information exchange agreements signed by the Cayman Islands, the convention can form the basis for any multilateral form of administrative cooperation between states in the assessment and collection of taxes, in particular with a view to combating tax avoidance and evasion.
This cooperation ranges from exchange of information, including spontaneous and automatic exchanges, to the recovery of foreign tax claims. At the G20 Summit in Cannes, France in November 2011, all G20 countries participated in a ceremony to mark the signing of the convention. During the past two years, more than 60 countries have signed the convention or stated their intention to do so.
Jersey, Guernsey and the Isle of Man also confirmed their intention to sign the convention on Friday in letters to British Prime Minister David Cameron.
Gonzalo Jalles, CEO of Cayman Finance, said the organisation representing the financial services industry of the Cayman Islands is supportive of government’s intention to sign up to the convention and agrees with the concept of automatic exchange of tax information.
“In general we support everything that becomes a standard. And lately it has become clear that more and more countries are signing the [convention],” he said.
Mr. Jalles stressed that the convention is a framework which will need to be followed by bilateral agreements with the different countries. “It is our understanding that at that stage and even before you sign the convention you can state reservations.”
Reservations may include the concern that rules designed for tax authorities are not applied to financial service providers, he said. The convention will also extend intergovernmental cooperation to the enforcement of tax judgments.
Cayman Finance does not have an issue with the principle of one government assisting another in enforcing their laws. But, Mr. Jalles said, there is a big question mark over the implementation of the convention.
“The devil is in the detail. We are not prepared to build a tax authority or a collection agency or incur huge costs to collect other people’s taxes.”
The Cayman Islands government further announced that it has accepted invitations from Mr. Cameron to attend two events on 15 June, immediately prior to the G8 meeting.
These include a private meeting with Mr. Cameron, and the “Open for Growth”, also called the tax, transparency and trade meeting.
Mr. McLaughlin said that Mr. Cameron, in his invitation, acknowledged the UK’s interest in seeing its overseas territories and Crown dependencies flourish.
“This important recognition acknowledges the benefits that international financial centres, like Cayman, contribute to the global economy – including the stimulation of cross-border trade and investment, which grows economies and creates jobs,” he said.
The premier will attend the private meeting with Mr. Cameron; accompanying him to the “Open for Growth” meeting will be the Minister for Financial Services Wayne Panton.
The G8 meeting will be held on 17 and 18 June in Ireland.