EU issue remains ‘fluid’ as deadline approaches

Financial Services Minister Tara Rivers with Alexander Kmentt, Austrian Ambassador to the EU Political and Security Committee (PSC)

(CNS): Financial Services Minister Tara Rivers described the situation between the Cayman Islands and the European Union over the looming threat of blacklisting at the end of this year as “fluid” following meetings in Brussels last month. The Cayman Islands avoided the latest offshore finance list in 2017 regarding the tax regime here but was told by the European Union it had to address tax transparency and the “lack of economic activity” of companies domiciled here. What that means for the financial services sector and its future trade with Europe has never been made entirely clear.

But whatever is expected of Cayman must happen by the year-end to prevent the jurisdiction from being blacklisted. Rivers said that developments remain fluid but after meeting with the Unity government caucus on Tuesday and representatives from the offshore sector on Wednesday, she said she welcomed the opportunity to engage and discuss the issues with the European officials.

“All meetings took place in a very constructive atmosphere,” the minister said in a release from the ministry. “The visit, together with earlier visits this year and in 2017, has helped to underscore Cayman’s commitment to ongoing cooperation with the EU on matters that are of mutual interest and benefit.  Hopefully, this ongoing dialogue with the EU officials and Member State representatives also promotes an increased understanding that our financial system is not designed to facilitate harmful tax practices.”

Rivers said government has been constantly engaging with local and EU audiences and was committed to continuing that robust engagement process, as she urged the industry, which has been helping to inform the legislative proposals, to continue their participation.

In Brussels, Rivers and her staff met with the Cabinet of Valdis Dombrovskis, European Commission Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union; officials from the European Commission’s Directorate General for Taxation and Customs (DG TAXUD); and representatives from many permanent representations to the EU, including the current EU Council President and Permanent Representation of Austria.

As the list of cooperative jurisdictions that have undertaken commitments is currently being reviewed, Rivers and her team updated these key decision-makers on the efforts already made and the work planned by government to enhance tax transparency and cooperation with the EU, as appropriate, according to the release.

The delegation also addressed a number of questions regarding the financial industry in the Cayman Islands, in an attempt to increase the general understanding of its role as an international financial centre and clarified government’s position on some key elements in the screening process (the so-called 2.2 criterion). The delegation also received relevant and useful feedback in relation to the legislative proposals that are currently in the making, the ministry said.

The process of addressing the EU screening criteria during 2017 involved discussions with industry representatives throughout; however, government’s and the ministry’s conversations with all Cayman Islands stakeholders have increased since 5 December 2017, when the EU named the Cayman Islands as one of 47 jurisdictions that needed to ensure that further work is done to satisfy the EU criteria, the ministry said.

This engagement with the EU to keep Cayman from being sanctioned, the details of which have not been made generally public, comes against the uncertainty of Brexit and what the relationship of the UK, and by extension its overseas territories, will be with the EU from next year, when the deadline to leave arrives in March.

It also comes at a time when the relationship between the Cayman Islands and UK governments has soured, after Britain bowed to back-bench pressure to pass legislation requiring the territories to implement public beneficial ownership registries, despite previous agreements to address relevant access to that information through other means.