(CNS): The decision by the Dutch government to publish its own subjective “blacklist”, which included the Cayman Islands because tax rates are lower than in the Netherlands, is unusual and ignores the facts, especially as Cayman has had a tax information exchange agreement (TIEA) in place with the Netherlands since 2009, according to the financial services industry body, Cayman Finance. The TIEA facilitates the exchange of tax information to enable better tax collection by the Dutch and supports investigations into alleged tax evasion, officials said in a release Thursday, adding that Cayman annually automatically exchanges information with tax authorities in over 100 countries.
Cayman Finance echoed comments made by government last week following the surprise emergence of this separate blacklist, which comes in the middle of a battle Cayman and other offshore financial centres are having with the wider European Union about its blacklist, which is set to be reviewed in February.
The blacklisting also comes just a few weeks after Cayman Islands lawmakers passed far-reaching legislation that will change how offshore companies domiciled here do business and pave the way for them to meet economic substance requirements.
Cayman Finance said the Dutch government had failed to take into account Cayman’s demonstrated adherence to international standards for transparency or participation with the OECD’s BEPS Inclusive Framework and ignores its engagement with the EU’s Code of Conduct Group over the last two years to address concerns regarding economic substance.
“While discussions and negotiations relating to this and other blacklists are government-to-government processes with the Ministry of Financial Services taking the lead with regard to the Cayman Islands response to this development, Cayman Finance stands ready to support the government as we protect, promote, protect, develop and grow this important pillar of the Cayman Islands economy,” said Cayman Finance CEO Jude Scott.
“As such, we wholeheartedly reject this attempt to tarnish the reputation of the Cayman Islands and our financial services industry, which has been established as a premier global financial hub, efficiently connecting law-abiding users and providers of investment capital and financing around the world benefitting developed and developing countries,” he added.
The Cayman Islands does not have double taxation treaties and so doesn’t pose a risk of aggressive tax avoidance. It is tax neutral and adds no additional tax to financial services transactions in its jurisdiction. Investee entities and investors are still subject to reporting and paying their home jurisdictions’ relevant taxes. The Cayman Islands also meets or exceeds globally accepted standards for transparency and cross border cooperation with tax authorities and law enforcement, Cayman Finance added.
“At the same time that the Dutch government has taken this unusual decision to give the Cayman Islands this classification, international policy makers continue to recognise the vital role Cayman’s financial services industry plays as a strong partner in combatting corruption, money laundering, terrorist financing and tax evasion,” the industry body said in a statement about this latest blacklist.
It said the definitions of tax havens by leading international organisations do not apply to the Cayman Islands as the legal, regulatory and legislative basis for the financial services industry here clearly demonstrates it is a transparent, tax neutral jurisdiction and not a tax haven.
“Cayman Finance 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,” officials added.