A Labour government would ask the Organisation for Economic Co-operation and Development to put U.K. overseas territories and crown dependencies on an international blacklist after the U.K. general election in May if they refuse to cooperate with measures to curb tax avoidance, Ed Miliband, the leader of the Labour Party, said last week.
Mr. Miliband said U.K. Prime Minister David Cameron has failed in his initiatives to make the overseas territories more transparent by demanding the implementation of a register of beneficial ownership of shell companies and other entities.
Cayman recently rejected the idea, saying its existing regime is already internationally compliant. However, the Cayman government announced plans to speed up the process of obtaining beneficial ownership information for foreign tax authorities and law enforcement agencies. A register of beneficial ownership would be implemented only if there was concerted international action, the government said in December 2014.
Mr. Miliband told The Guardian: “A Labour government is not going to have endless consultation and dithering. We are going to give six months to these tax havens to agree to publish a register of beneficial ownership, and if they do not act, we will recommend to the OECD that they are put on a blacklist.”
Mr. Miliband said public share registers are necessary “so that the tax authorities in the U.K. can get at the people that are avoiding their taxes.” He added, “It could be billions of pounds that we are missing.”
The Labour leader said he was sending a letter to the overseas territories and crown dependencies to inform them of his intentions.
The Cayman Islands government said Tuesday it had not received such a letter. “Cayman therefore can respond only to media reports about Miliband’s insinuations regarding our beneficial ownership regime,” said Minister of Financial Services Wayne Panton.
The minister said he was surprised that a U.K. elected official, who should be well versed in the current discussions on this important topic, would attempt to publicly distort the reality in light of readily available, third-party assessments and facts.
“In short, Mr. Miliband is wrong. How is he not aware that the OECD, the Global Forum on Transparency and Exchange of Information for Tax Purposes, the Financial Action Task Force, the G20, and the International Monetary Fund all disagree with his broad general statements?” he asked.
“Cayman therefore finds itself in the position of repeating factual information that already is in the public domain, and as such is available to Mr. Miliband and his advisers.”
He stressed that Cayman’s support of the global agenda is demonstrated by the fact that its current method of collecting, maintaining and updating beneficial ownership information through corporate service providers, and providing the information to law enforcement, tax and regulatory authorities, is firmly in line with the FATF recommendations, as well the G20’s High-Level Principles on Beneficial Ownership Transparency, issued in November 2014.
“In other words, Cayman’s regime – which has been in place for more than a decade – continues to align with principles that the G20 countries themselves uphold as the standard,” Minister Panton said.
Anthony Travers, chairman of the Cayman Islands Stock Exchange, said the Labour leader’s comments show that Mr. Miliband is “hopelessly out of touch in relation to international tax avoidance.”
“In fact, the overseas territories have maintained complete records on ultimate beneficial ownership to the international gold standard set by the OECD for over two decades.
“What quite the OECD would make of Mr. Miliband’s threatened report given the OECD’s own verification on the subject and the overseas territories’ commitment to the OECD Automatic Reporting Standard is a matter for conjecture and possible further embarrassment,” Mr. Travers said.
Mr. Miliband’s suggestion that authorities had been hampered in their tax investigations does not “bear any relation to the reality,” given that overseas territories have granted by treaty unlimited powers to the IRS and HMRC to undertake investigations, Mr. Travers added.
If Mr. Miliband wants to capture billions, the stock exchange chairman said, he should look at domestic tax legislation on transfer pricing.
Labour’s plans have been dismissed by British Chancellor George Osborne, who said the Labour leader was unfit for office and did not understand the present system.
“If you actually look at what he’s saying, he wants to blacklist every country of the OECD that doesn’t have these central registers,” Mr. Osborne said.