The Cayman Islands has dropped from first to 14th in the Tax Justice Network’s latest financial secrecy ranking.
The tax transparency advocates said new data disclosed by Cayman in the IMF balance of payments database revealed that the true scale of financial services provided to non-residents was “significantly lower than previously estimated”.
The TJN had previously used data from the IMF’s Coordinated Portfolio Investment Survey for Cayman, which in June 2021 showed $3.37 trillion in investment assets being routed through Cayman. This makes Cayman the eighth-largest investment destination in the world, but it does not reflect the amount of financial services provided, potentially for financial secrecy purposes, to non-residents.
A report by Cayman Finance, released in 2021, heavily criticised the methodology behind the advocacy group’s secrecy index. The ranking combines the size of a country’s financial exports with a secrecy rating based on 20 criteria.
The report said rather than using readily available balance of payments data for Cayman, the TJN had overestimated the island’s financial exports by more than 860%.
In the latest iteration of the ranking, the TJN said, “Cayman’s drop in financial secrecy is also aided by a secrecy score drop from 76 to 72 primarily resulting from the UK government extending the application of the UK’s ratification of the UN Convention for the Suppression of the Financing of Terrorism to Cayman in 2021 and the UN Convention against Corruption in 2020”.
The United States now occupies the top spot of what the tax group calls “a global ranking of countries most complicit in helping individuals to hide their wealth from the rule of law”.
Although the TJN acknowledged that “financial secrecy services” had declined as a result of transparency reforms, it blamed the US, United Kingdom, Japan, Germany and Italy for holding up greater progress.
One day before today’s meeting of G7 finance ministers in Germany, the group called on the G7 to commit to a global asset register “to bring law and accountability” to an estimated $10 trillion in “lawless wealth secretively held offshore by wealthy individuals”.
According to the ranking, the US increased “its supply of financial secrecy” to the world by almost a third, making it twice the size of second-placed Switzerland and larger than Switzerland, Cayman and Bermuda combined.
That development was driven in part by the US failing to exchange tax information with other countries’ tax authorities under the OECD Common Reporting Standard and the Convention on Mutual Administrative Assistance in Tax Matters.
The TJN said this undermines US President Joe Biden’s pledge to fight illicit finance and corporate tax abuse by multinational companies, given that the US has called for a global minimum corporate tax rate.
If the US were to exchange tax information reciprocally, it would only rank third in the index, behind Switzerland and Singapore, the TJN said.
The top 10 jurisdictions in the financial secrecy ranking are:
- United States
- Switzerland
- Singapore
- Hong Kong
- Luxembourg
- Japan
- Germany
- United Arab Emirates
- British Virgin Islands
- Guernsey
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