CIFSA condemns grey listing

| 05/04/2009

(CNS): The mixed result at the G20 summit for the Cayman Islands has also been given a mixed reception by the private sector. Over the weekend the Cayman Islands Financial Services Association said it was extremely disappointed to see the Cayman Islands on the OECD “grey” list and condemned the international organization. Meanwhile, Walkers issued a statement saying it would be inconceivable that any adverse measures would be applied to Cayman and Maples also said it was pleased to see that the OECD recognised the significant cooperation by the Cayman Islands.

CIFSA, however, expressed in no uncertain terms that Cayman should have been on the white list. Itsaid that it had been hoped that the OECD would undertake a rational objective analysis of the tax transparency established by the Cayman Islands over the past decade.  “In reverting to its political origins, the OECD has not improved its credibility and indeed, in acting in an arbitrary and prejudicial manner, raises questions about the value that is attributed by the G20 to the cooperation in tax and criminal matters that the Cayman Islands has demonstrated, “ the Association said in a statement . In one of its most assertive statements ever concerning the unfair  treatment of the jurisdiction, CIFSA explained that Cayman has full and relevant tax transparency, not only with the United States but proactive reporting with 27 European Union nations under the  2005 European Union Savings Tax Directive.

“However, according to the OECD the Cayman Islands finds itself characterized with the wholly non compliant nations which are the root cause of the current tax evasion furor,” the statement noted. “The determination by the OECD to ignore the unilateral mechanism, which is well respected by a number of OECD members, shows the OECD still applies a double standard which clearly has nothing whatsoever to do with the good faith disclosure of information in tax matters, assuming that Cayman Islands financial institutions have anything of interest to disclose.”

CIFSA stated that at least the OECD has now set an objective test for positioning on the “white” list and noted that this is less than the total number of tax exchange arrangements that the Cayman Islands currently has in place, and as Cayman has maintained its commitment to execution of further bilateral treaties, assuming its approaches are met in good faith, the OECD will be obliged to remove Cayman from its current list swiftly.

Walkers, however, seemed to be considerably happier with the outcome, not least because of the fact the crown dependencies are on the while list and Walkers has an office in Jersey, which it noted had recently signed new tax information exchange agreements with France and Ireland.

“Walkers has had a full service Jersey office since 2006. Jersey’s position on the ‘white list’ reaffirms that Jersey has a model tax regime which meets the highest standards of transparency and regulation,” Grant Stein, global Managing Partner said. “This endorsement will bolster Jersey’s reputation as a hub for investment funds and structured finance vehicles.”

He added that while Cayman was on the grey list it has the highest number of bilateral tax information exchange agreements, which it is understood is the principal yardstick by which the jurisdictions’ progress in tax matters has been measured.  Stein said that as the OECD did not specify what the consequences would be, if any, for the "grey list", It is likely that all of the jurisdictions’ progress in tax information exchange matters would be assessed over the coming months, and those that are deemed to have made insufficient strides may be subject to certain sanctions in due course.

“It therefore seems to us to be inconceivable that any adverse measures will be applied to Cayman or the BVI. In addition, it should be noted that the sophisticated international finance transactions for which Cayman, the BVI and Jersey are used are not what this initiative seeks to target, namely tax evasion.”

He said the achievements of these jurisdictions, in which it operates in the areas of exchange of tax information and transparency, anti-money laundering and financial regulation, stand up to the closest scrutiny. “We are confident that their progress in tax information exchange matters will continue to be applauded. In turn, we will welcome those G-20 and OECD members which currently have deficient anti-money laundering regimes bringing their regimes up to the accepted international standards long applied by Cayman, the BVI and Jersey,” Stein added.

Meanwhile Maples said it was pleased to see that the decision by the Organisation for Economic Cooperation and Development (OECD) to place Cayman on a list of jurisdictions that have committed to "internationally agreed tax standard[s]" recognises the significant cooperation by the jurisdiction.  It said that while the OECD is still reviewing the Cayman Islands legislation introducing the unilateral mechanism, it chose not to include the unilateral arrangements in the total number of commitments that the Cayman Islands have entered into.

 “Earlier this week, the OECD praised the Cayman Islands for ‘setting a good example’ in relation to tax information exchange agreements and noted that it was one of the first jurisdictions to commit to the OECD standards,” the Maples statement said. “We therefore look forward to the Cayman Islands being moved to the list of jurisdictions that have substantially implemented internationally agreed tax standards as soon as the OECD review is complete.”

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