The organization that represents Cayman’s financial services industry has rejected the inclusion of the Cayman Islands on a Dutch tax blacklist, stating that Cayman does not pose a risk of aggressive tax avoidance.
Cayman Finance said it finds it “unusual” that the government of the Netherlands released a tax list solely on the basis that the corporate tax rates of the blacklisted jurisdictions are considered too low.
The Dutch ministry of finance said the list intends to prevent companies from avoiding tax by moving mobile assets to low-tax jurisdictions. It will be used from 2021 to apply a withholding tax of 20.5 percent on interest and royalty payments from the Netherlands to entities in listed jurisdictions. The list will also be used in a number of other tax scenarios and transactions.
Cayman’s financial services association said the action does not take into account Cayman’s demonstrated adherence to international standards for transparency or participation with the OECD’s BEPS Inclusive Framework, and it ignores Cayman’s engagement with the EU’s Code of Conduct Group over the last two years to address their concerns that Cayman companies do not have enough economic substance.
Cayman Finance CEO Jude Scott said while government is taking the lead in response to the initiative, “Cayman Finance stands ready to support the government” in protecting and promoting the industry.
“As such, we wholeheartedly reject this attempt to tarnish the reputation of the Cayman Islands and our financial services industry,” he said.
The organization said in a press release it was important to note that the Cayman Islands does not have double taxation treaties and therefore did not pose the risk of aggressive tax avoidance.
In addition, the Cayman Islands has had a tax information exchange agreement (TIEA) with the Netherlands in place since 2009. This agreement facilitates the exchange of tax information to enable better tax collection by the Netherlands and support any investigations into alleged tax evasion.
Cayman Finance said it encourages authorities in the Netherlands “to consider all the facts before taking such a position about a globally beneficial and well-regulated jurisdiction like the Cayman Islands.”