Rivers battles with definition of ‘economic substance’
Minister Tara Rivers attends a range of meetings and forums in Brussels
(CNS): Financial Services Minister Tara Rivers has said there are still questions regarding the expectations of the European Union on the definition of “sufficient economic substance”, which is the key to Cayman’s future cooperation. Rivers is currently in Europe attending meetings, summits and forums regarding tax issues and concerns in Europe that led to Cayman being on a ‘grey-list’. Although Cayman is required to do more to meet EU expectations, it has never been made clear what the expectations are for this jurisdiction to avoid being on a black-list by the year-end.
“As evidenced by the variation of substance requirements that exists here among the EU Member States, it is important to note that there is no globally accepted definition of sufficient economic substance,” Rivers said at a seminar during her current visit to Brussels. “We therefore hope that the attempt to develop standards related to sufficient economic substance is truly global; common standards would be desirable. Of course, for these standards to be globally acceptable and applicable, they must take into account different business types and tax systems that exist.”
Outlining Cayman’s tax system for the representatives in Europe, Rivers said that Cayman’s financial system was “not designed for tax structuring purposes because there are no legal mechanisms, such as double tax treaties, free trade zones, or other preferential tax regimes, to encourage shifting of profits or the erosion of the EU tax base. There are no shell companies, no bearer shares, and no numbered accounts,” she explained.
According to a release from her ministry, Rivers said that given the high level of tax transparency, which has existed for many years now, the notion that somehow Cayman is a place to hide money is incorrect.
During a round table at the European Business summit, she told attendees that Cayman’s primary function is to enable investment flows to be efficiently and effectively deployed around the world.
“Cayman’s adherence and ongoing support of international standards allows international competent authorities – including those relevant authorities in each EU Member State – to have access to the information they need from Cayman to determine and protect their own bases,” she added.
While Cayman is facing pressure from the UK and Europe, Rivers is also keeping an eye on what is happening in the United States. Last month the minister was in Washington, where she met with US lawmakers and regulators to discuss tax issues there. She also met with several people regarding correspondent banking termination issues, which has impacted Cayman’s money transfer operators. Rivers explained to US officials that de-risking remains an important matter for Cayman.
The message Rivers delivered in various meetings was that Cayman is a sophisticated international finance centre with international recognition as a well-regulated and cooperative jurisdiction, which should lead banks to classify it as a non-risky jurisdiction.
“We focused on Cayman’s recent enhancements to our anti-money laundering regulations, and the stringent requirements related to identifying the beneficial owners of businesses and bank accounts,” she added in a release about the Washington trip.
Rivers and her team met several US policymakers involved in financial issues, and some understood that Cayman has implemented financial regulatory reforms that meet, and at times even exceed, international standards.
Some of the congressmen and their advisors that Rivers met expressed an interest in further investigating the impact of correspondent bank de-risking on foreign jurisdictions and entities as part of their subcommittee oversight activities, complementing their current work focused on the detrimental impacts of banks who de-risked domestic businesses in the US under fear of criminal enforcement.
“This visit to Washington, DC, provided a valuable opportunity to engage directly with the US government and financial services industry leaders,” Rivers stated.
Category: Business, Financial Services
I need to increase the sale price of my house and property now, so when it happens I can still get the price I am offering today.
I’m nervous! Rivers is a legend in her own mind!
Thankfully she has excellent civil service help.
I think you meant excellent private sector help from the large law firms and Cayman Finance
I hate to say this but this Country has come to an end! The police do not know how to do their job, the UK is going to shut the country down. The people on this country are all fake and are not professional. Stop being so fake!!! I cannot get a flight fast enough to get off this rock!
Only an idiot would think what she said was remotely going to help. It sounds like an attempt to delay the inevitable. The definitions, unitary or separate, will definitely take into account OFCs as part of the “different systems”, and by “taking account’ that means making sure they do not fall within the definition. That is one of the central aims of the process.
It seemed from previous discussion that one particular expectation was for Cayman entities conducting material business through the island to have a real physical presence here. Not just a brass plate or company name board in the lobby of a bank/trust company etc.. Rather, a physical equivalent of the old concept of “mind and management” being seen to be actually in Cayman, rather than dummy directors/officers being instructed by principals in another jurisdiction, and merely recording the transactions they had been told to effect.
In practice, that would be virtually impossible in the context of the office space, and resident staff, required to be compliant with the demands of the EU.
8:38 you hit the nail exactly on the head. The EU, UK, U.S. & Canada are fed up with nothing more than a brass plate or company name board in the lobby of a bank / trust company. Just who do we think we are fooling after the Panama & Paradise Papers?
Hard times are a comin.
Would anyone have a problem with this? People with extremely high levels of disposable income (who can’t vote) coming to Cayman? Anyone?
Great job, Minister Rivers! So proud of what you are doing to represent our interests and defending our country abroud. By casting my X, I’m glad that I was able to help you get the chance to continue the hard work you’ve been doing as our MLA. You had my vote then and have it now!
A proud Caymanian and WBS constituent.
Whatever the definition of economic substance exempt companies are never going to satisfy it. That is the point of the definition, to block out parasitic havens of convenience.
What surprises me the most is that Tara Rivers is actually doing some work on this shopping trip! That’s a first!
Tara hot on the trail – blacklist here we come
Under the recent GPDR thingy I do not consent for my private business data to be shared in a public registry.
Thank You,
Love it…tek dat Eurocrats…hoisted by your own petards…
Sell your shares then. No one is forcing you to have the benefit of limited liability investments.
I have to say I am actually quite impressed, much to my own shock.
Minister Rivers is an extremely intelligent and capable woman. I have heard her speak on a number of occasions and continue to be impressed with her ability to represent us every time. Glad to hear you agree, and hope the prejudices that seem to exist will be put to rest.
If only she would demonstrate it more often
No doubt she’s bright just completely useless. A bag of hot air and long paragraphs with loads of words never answering the question.
Well if there’s no economic substance to these entities or transactions in Cayman, then what is there for Cayman to tax? If the EU thinks the economic substance is really in the EU, isn’t this a question for their own tax laws? Seems like something other than taxes is driving this.
More gobbledygook for those of us who actually have to work for a living rather than shuffling papers around, gossiping at the photocopier, sending copious emails and generally being a nuisance on the cellphone.
You know who you are.
Cue 1000 thumbs down, lol.
Major inferiority complex there man….you are welcome to come do our photocopying, if you are qualified to do so.
Mr or Mrs Gobbledygook This is the reason we need to elect educated MLA’s who can represent Cayman and argue or position on the world stage. At least half of what we have now cant even speak correct English. Think before you vote or dog eat your supper.
have to agree with 3.27 pm. How do these people get voted into office? their English is atrocious. so much embarrassment to the country.
By keeping politics an unsavoury game they keep everyone who would be better at it from trying. It’s a racket like any other. You can ruin your reputation just by running.
Well done Minister.
You right about that. She is a very bright educated Cayman woman.. A lot of people didn’t give her a fair chance, much more intelligent and articulate that her predecessor.