Cayman dodges tax list but pressure persists
Valdis Dombrovskis, European Commission VP
(CNS): The Cayman Islands government has welcomed the news that this jurisdiction has avoided the latest European Union tax blacklist, but officials have indicated that the pressure is still on as the EU continues to express further concerns about economic substance requirements for collective investment vehicles (CIVs), otherwise known as funds, and one of the financial sector’s most significant area of business. While Cayman dodged the blacklist of fifteen countries, which now includes Bermuda, this jurisdiction will still be monitored as it remains on a grey-list.
According to the conclusions and revised blacklist published by EU finance ministers Tuesday, Cayman, the Bahamas and the British Virgin Islands have committed to addressing concerns relating to economic substance in the area of collective investment funds and “have engaged in a positive dialogue… and have remained cooperative”. However, Cayman is now under pressure to pass more legislation.
Speaking at a press conference about the revised blacklist, Valdis Dombrovskis, vice president of the European Commission, said, “There is still a grey list with 34 countries, which will continue to be monitored in 2019.”
Officials from the Cayman Islands Ministry of Financial Services said that government was pleased Cayman was not on the black-list, but they had expected to avoid it, having lived up to the commitments made to pass laws dealing with substance requirements and removing restrictions on certain types of companies from conducting business locally, as well as additional accounting and regulatory requirements.
But the ministry also said it was aware of the latest concerns regarding more economic substance requirements for funds.
“While the government has committed to continuing its engagement and dialogue with the EU on this issue, it should be borne in mind that the global standard requiring economic substance for relevant financial and corporate entities, set by the OECD’s Forum on Harmful Tax Practices, does not include CIVs,” the finance ministry stated in a release.
“As such, Cayman’s legislation is based on the global standards, and we will continue to adhere to global standards with regard to economic substance requirements for relevant entities.”
However, it is clear from Tuesday’s press release from the EU and comments from the council of finance ministers that they believe the blacklisting is working and has led to countries “having changed their laws and tax systems to comply with international standards… and over 100 harmful regimes were eliminated.”
The EU said the list had also had a positive influence on internationally agreed tax good governance standards.
“The EU tax havens list is a true European success. It has had a resounding effect on tax transparency and fairness worldwide,” said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs.
“Thanks to the listing process, dozens of countries have abolished harmful tax regimes and have come into line with international standards on transparency and fair taxation. The countries that did not comply have been blacklisted, and will have to face the consequences that this brings. We are raising the bar of tax good governance globally and cutting out the opportunities for tax abuse,” he added.
The EU conceived the idea of this blacklist in December 2017 and the screening will now be enhanced, officials stated. Member States have now agreed on a set of countermeasures, which they can choose to apply against countries on the blacklist, ranging from increased monitoring to anti-abuse provisions.
Laws have also been enacted to prohibit EU funds from being channelled or transited through entities in countries on the tax blacklist.
The previous blacklist of five countries was made up of American Samoa, Guam, Samoa, Trinidad and Tobago and US Virgin Islands, all of which are still on the list, which was expanded to 15 countries on Tuesday, with the addition of Aruba, Bermuda, Barbados, Belize, Dominica, Fiji, Marshall Islands, Oman, United Arab Emirates and Vanuatu.
See the conclusions and revised blacklist in the CNS Library
Category: Business, Financial Services
If EU countries want to control where their citizens keep their money, where they do business or which profits they tax, they should pass their own laws. It is not Cayman’s job to decide how much taxes Germans should pay to Germany or anywhere else. This is one reason why the US taxes its citizens everywhere. They don’t worry much about Cayman’s no-tax structure.
It will never be enough for the EU. They have to pay all those bureaucrats somehow. At some point the offshore jurisdictions will have to embrace the blacklist or become EU tax proxies.
Take the time to read the Panama Papers and the Paradise Papers and then you will understand why the EU takes the action they have taken. Problem places like Cayman, BVI, Bermuda, etc have is that they are in denial of the financial irregularities that happens in those places. It is all there in the Panama / Paradise Papers. Read them.
The majority of persons who take advantage of the low/ non tax rates in various jurisdictions live and abide in the high tax jurisdictions so guess who are benefiting from the low tax? They think they are so smart but haven’t figured that out yet.
The EU is the real banana republic. The U.K. Isn’t far behind with this Brexit mess. They voted to leave the EU primarily so they could Keep the EU citizens out of the U.K. And now it seems like they really don’t want to leave. To all of the knuckleheads in the FAC who are lining up to take over Cayman. We little and talawah but do not take our meekness for weakness!!
A world class Government. Kudos to all.
While I welcome this news, and think that generally the new Substance Law will be good for Cayman, I do worry that the EU, and others, will continue moving the goalposts. They set a standard, we meet it, they then think “oh, maybe the standard should be even higher then?” We are reviewed and tested ad nausea, when will it stop? And, will it stop before we have to say “Enough! We can’t do anymore!”
Csyman is the hardest place to open a Bank Acc.(for Caymanians) one has to answer a hundred questions (some is personal) and go thru the same thing to open a second Acc. At the same bank a year later. In the U S A, its very easy, just answer a few questions and that’s it.
Precisely, because good governance and stopping money launderers and drug dealers is a BS facade they use to destroy this (and others) financial sectors.
The end goal for these socialist tyrants, is to totally and completely destroy competing finance sectors so they can continue to punitively and increasingly tax individuals and companies without escape. They are globalists scumbags that seek to remain in power by redistributing _other people’s_ wealth on an international scale.
BTW, they are well succeed with the global warming tax fraud leftist loonies have swallowed hook line and sinker.
All of this, will only get more punitive over time, keep an eye out for it.
You are spot on!
Not sure what that idiot from the UK was reporting in his documentary because this is by far one of the most difficult places to open an account and I am saying this having lived in other countries.
Problem is that Manafort and Russians around Trump have laundered money in Cayman. Don’t really need a bank account but a good Caymanian front. We don’t like to talk about it but we do have money laundering problems here. A number of real estate developments and restaurants on Grand Cayman hav questionable sources of money.
This has nothing to do with know your client which is at the heart of opening a bank account or a business – its about shifting profit into jurisdictions where there is a zero or “low” – lower than the EU! – tax rate. However you are absolutely right its hypocritical – no one is pointing fingers at the Dutch using their Caribbean colonies to mitigate taxes, or the Irish, and certainly not the US – all of whom have way lower tax than major Eu countries. But then its not really about fairness – its about big nations who are struggling to police their citizens and make them pay heavy tax rates thinking the solution is to threaten small nations that cant fight back, rather than either reducing their tax rates or enforcing them locally.
*Internationally agreed good tax goverance standards*
What a bunch of poppycock. Taxation without proper respresentation? To hell with all of unna and your fancy “taxation phrases”. Take your “taxation” mentality and shove it.
They believe they’re “good tax goverance” eliminates regimes… I got news for unna, EU is the biggest oppressive regime in the world.