Despite numerous government measures to bring Cayman in line with the tax transparency guidelines propagated by the Organisation for Economic Cooperation and Development, Cayman is still only deemed “largely compliant,” according to the latest OECD peer review report.
This is essentially the same result as the 2013 review of the way in which Cayman collects and exchanges tax information with other countries.
Although government has addressed the recommendations in the last peer review report, certain amendments, for example with regard to the availability of beneficial ownership information, were “too new to evaluate,” the latest assessment noted.
On Monday, the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes released reviews of 10 jurisdictions conducted in 2016. Ireland, Mauritius and Norway received an overall rating of “compliant.” Australia, Bermuda, Canada, the Cayman Islands, Germany and Qatar were rated “largely compliant.” Jamaica was rated “partially compliant,” which led the Global Forum to launch a supplementary review of follow-up measures to ensure a higher level of compliance.
Cayman was rated ‘compliant’ in seven and ‘largely compliant’ in three of the 10 elements that made up the assessment.
“Cayman tested very well against this more rigorous set of standards, and this clearly demonstrates the high quality of our cooperation with our treaty partners,” said Minister of Financial Services Tara Rivers.
The new peer review follows a six-year process during which the Global Forum first assessed the legal and regulatory framework for tax information exchange and then the actual practices and procedures in 119 jurisdictions worldwide.
The Global Forum’s new review process combines the two elements with a focus on the ability of tax authorities to access beneficial ownership information of all legal entities and arrangements.
A 2013 peer review recommended that Cayman immobilize bearer shares and implement a regular system for monitoring ownership information, as well as a system for maintaining accounting records by Cayman-based entities.
In response, the Cayman Islands abolished all bearer shares in 2016 and required them to be converted into registered shares by July 2016. Government also implemented a desktop and onsite inspection program to ensure that Cayman-based entities maintain accounting records.
The latest report concluded the requirements to maintain beneficial ownership information are generally well implemented in practice. However, the new beneficial ownership requirements for 11,000 domestic companies, put in place in March 2017, remain untested.
During the review period, one company refused to provide information in response to a notice requesting information that was not held in the Cayman Islands. Although the Tax Information Authority referred the case to the director of Public Prosecutions, the case was not pursued.
“Therefore, in those cases where information is not maintained in the Cayman Islands, the Cayman Islands should ensure that its enforcement powers are sufficiently exercised to ensure that it has access to all information in all cases,” the peer review stated.
The review found further that sound legal requirements exist for all companies to maintain accounting information, but the recommendation remains that Cayman should set up an effective oversight system.
A follow-up report on the steps taken to address the latest recommendations will be issued no later than June 2008, the OECD said.