G-20 calls it key to development of a global standard for automatic exchange of tax information
The Cayman Islands government has formally asked the United Kingdom to extend its membership in the OECD/ Council of the Europe Convention on Mutual Administrative Assistance in Tax Matters to the Cayman Islands.
The announcement of the formal request came a day after four members of the U.K. Parliament tabled an early day motion tabled in the House of Commons on Sept. 4, which noted “that although all the British overseas territories have committed to joining the Convention on Mutual Administrative Assistance in Tax Matters, none have actually done so and no time frame has been set in which they will do so.”
Wayne Panton, the Cayman Islands minister for financial services, said the formal request to join comes after months of substantive discussions between Cayman and the U.K.
“It underscores our continued commitment to proactive participation in matters related to international tax cooperation,” he said.
The convention is a multilateral instrument designed to combat tax evasion and aggressive tax avoidance by allowing member states to assist each other in tax matters.
Administrative assistance can range from the exchange of information to tax examinations abroad.
As is common with international instruments, signatory countries can choose to opt out of certain aspects of the convention, but they cannot opt out of the convention’s core elements regarding the exchange of tax information, the government said in a news release.
Cayman will not handle matters related to requests for the recovery of foreign tax claims, or exchange of information regarding local taxes and social security contributions, the statement said.
Mr. Panton noted that the convention is aligned with the international standard on information exchange for tax purposes, and it therefore represents another major development in the global tax and transparency landscape. He said he looks forward to officials from Cayman and the U.K. Treasury working together to complete the necessary steps for extension.
Cayman Finance, the representative body of financial services associations, said it fully supports the decision to join the convention.
“The financial services industry was consulted, through Cayman Finance, during these discussions and we are confident that the implementation of the bilateral agreements that will arise from the convention will consider the needs of our jurisdiction,” said CEO Gonzalo Jalles.
He added that the convention is a standard adhered to by more than 50 countries, and that it is crucial for our industry to remain aligned with global movements in the direction of automatic exchange of information.
The Group of 20 leaders released a declaration at last week’s meeting in St. Petersburg, Russia, calling the convention a powerful tool in the fight against tax evasion and stating that the next challenge regarding automatic exchange of information is to get all jurisdictions to commit to a global standard and put it into practice.
The G-20 supports the OECD’s work in developing the global standard for automatic exchange of information and set a timeline of February 2014 for the establishment of the global standard itself and mid-2014 for finalizing the technical modalities.
“The multilateral convention is key to ensuring rapid implementation of the new standard and to enabling developing countries to benefit from the new more transparent environment.
“We expect all jurisdictions to join the convention without further delay,” a tax annex to the declaration said.
The declaration also noted that tax rules should not allow or encourage multinational corporations to reduce overall taxes paid by artificially shifting profits to low-tax jurisdictions.
“Cross-border tax evasion and avoidance undermine our public finances and our people’s trust in the fairness of the tax system.
“Profits should be taxed where economic activities deriving the profits are performed and where value is created,” the declaration said.
The G-20 leaders endorsed an OECD action plan to close corporate tax loopholes. They encouraged countries to examine how their own domestic laws contributed to the erosion of the tax base and profit shifting and to ensure that international and their own tax rules did not allow or encourage multinational enterprises to reduce overall taxes paid by artifi cially shifting profits to lowtax jurisdiction.
Meanwhile, the motion in the House of Commons last week acknowledged that automatic sharing of tax information will aid transparency, but said “it will not in itself alter the tax regimes which made these territories attractive to companies and individuals aiming to minimize their taxes.”
It called on the U.K. government to take action both domestically and internationally to tackle the use of tax havens by multinational companies and individuals operating in the U.K. or in territories under its jurisdiction and requested clarification on when a register of beneficial ownership will come into force.
It also demanded information on which British overseas territories will sign up to the register and whether it will be publicly accessible.
Cayman will not handle matters related to requests for the recovery of foreign tax claims, or exchange of information regarding local taxes and social security contributions.