UK announced centralized public register last week
The Cayman Islands government will circulate a public consultation document this month on a proposal to introduce a public register of beneficial owners of Cayman entities.
Cayman Islands Minister for Financial Services Wayne Panton said the public register of beneficial ownership information proposed by the U.K. would allow a citizen of any country to access information on the beneficial owners of U.K.-registered entities.
British Prime Minister David Cameron announced plans to create a publicly accessible central registry of information on beneficial ownership in the U.K. last week.
Mr. Cameron, who had made tax transparency a key theme of the June G-8 summit, said a small minority had hidden their business dealings behind a complicated web of shell companies and “this cloak of secrecy” led to “questionable practice and downright illegality.”
In their post-summit communiqué in June, the G-8 leaders stated that a lack of knowledge about who ultimately controls, owns or profits from companies and legal arrangements, including trusts, can assist tax evaders and money launderers. They were also concerned about the potential misuse of shell companies for corruption, tax evasion and money laundering.
In a speech at the Open Government Partnership 2013 on Oct. 31, Mr. Cameron noted that the situation was not only unfair to millions of taxpayers, but also bad for business.
He said the public registry of beneficial owners of companies is necessary to keep corporate taxes low because there could be no “low tax case” without “a tax base.”
Making the centralized repository of beneficial ownership information publicly available would be beneficial for businesses and developing countries, “who will have easy access to all this data, without submitting endless requests for each line of enquiry,” he said.
Mr. Cameron called on other countries to follow suit to end “shadowy, corrupt, illegal practices.” At the G8 Summit in June, the Cayman Islands committed to assessing its own regime of beneficial ownership. In an action plan on the misuse of companies and other legal structures, Cayman said it would evaluate by 2015 whether a central registry of beneficial ownership is the most appropriate and effective way to improve transparency.
“Further to that commitment, our public consultation document will be issued this November,” Mr. Panton said. “Along with our consultation, we will continue to monitor the global response to the U.K.’s announcement and any proposals that are made by other G8 countries, the G20 and other relevant international bodies on matters related to transparency.”
Level playing field
Crucially, the success of any new transparency measure will depend on widespread adoption of similar practices by Cayman’s financial services competitors.
“Universal success will be predicated on a fair and level playing field in which all jurisdictions adhere to accepted and recognized standards,” Mr. Panton said.
Following the release of the Cayman Islands action plan in June, Tim Ridley, former chairman of the Cayman Islands Monetary Authority, warned that the government needed to be careful not to impair its competitive position by “gold plating” the domestic regime unnecessarily.
“It is imperative that we not unnecessarily expand the requirements for disclosure, record-keeping or governmental filings, unless and until those requirements are internationally adopted and actually implemented, in particular by the major onshore jurisdictions and our competitors,” Mr. Ridley said.
Cayman Finance CEO Gonzalo Jalles also raised objections to the idea. “In our opinion, there are not many benefits of a centralized registry, because under the existing [tax] agreements it is not that difficult to access that information,” he said in June.
However, irrespective of the skewed cost-benefits, if there was a level playing field with central registries as the common standard, Cayman Finance would not be opposed to it, he stated.
Beneficial ownership information
Mr. Panton explained that beneficial ownership information is already collected and available in Cayman. This was confirmed by the April 2013 Phase 2 Peer Review Report by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.
Licensing requirements in Cayman demand that financial services providers collect and update information about beneficial owners of companies and trusts and maintain these records on their premises.
“Through our recognized legal and regulatory infrastructure, that information has been collected and updated in the jurisdiction for more than a decade,” Mr. Panton said.
“The U.K.’s proposal to consider a public register on beneficial ownership continues the U.K.’s strong political stance on tax and transparency matters and expands the public discourse on the best way to facilitate a global standard. The Cayman Islands will continue to engage in the discussion, and to support the U.K. and the global financial industry in developing effective standards,” he added.
On Tuesday, the Cayman Islands government was also due to sign a FATCA-style agreement with the U.K. regarding U.K. taxpayers who hold Cayman Islands accounts.
U.K. Finance Minister George Osborne told Parliament on Tuesday that as a result of this first-ever information sharing agreement with an overseas territory, “information on U.K. taxpayers held in the Cayman Islands will automatically be provided to HMRC [Her Majesty’s Revenue and Customs] who will use it to collect the tax that is due.”