US TIEA needs protecting
(CNS): The need to ensure that any new tax agreements will not apply retrospectively has been one of the major goals in the ongoing negotiating process of the information exchanges that the Cayman Islands has recently entered into. Criticised for taking too long negotiating these deals, Alden McLaughlin said that during his time in office the technical team had entered into negotiations with a number of countries that are due to be signed but had held firm on the crucial issue of non-retrospective exchange to protect Cayman’s most important TIEA with the United States.
“I hope the new team has been briefed about our previous negotiations and that this still remains a red line issue,” he told CNS.
Since taking office the new administration has signed a Double Tax Agreement with the UK, has negotiated and signed a bilateral Tax Information Exchange Agreement with Ireland, and has initialled the technical negotiations agreement which had been made with the Netherlands. However, it is not entirely clear whether those agreements could now apply retrospectively.
The former minister with responsibility for financial services, Alden McLaughlin said that while he was criticised for not signing deals quickly enough, the technical team had done a tremendous amount of work and had also been determined to ensure that no new agreements could put Cayman’s commercial advantages at risk.
“We had what we called two red line issues, which were, first, the scope of TIEA and preferences that it not include indirect taxes and, secondly, that they were not retrospective,” he said. “We had gone a long way with Australia, New Zealand and the Netherlands, all of whom had agreed to non-retrospectivity and we believed it was very important to hold these lines.”
McLaughlin explained that holding firm was not just about the business Cayman had done with these particular countries with whom the team were negotiating, as the exposure was fairly limited, but how it would impact existing TIEAs, especially that of the United States. He said if any other country managed to get an exchange agreement with Cayman that allowed for retrospective information requests the United States would seek the same concession, which would have far greater implications for Cayman’s offshore industry.
“The Nordic countries wanted full retrospectivity but we had to hold the line because if we did not the US would certainly demand to renegotiate their agreement. We were aware of the need to be consistent with the agreements,” McLaughlin added. He said the private sector had been pushing for the Cayman Islands government to just sign deals before the G20 but they had not given full consideration to what would happen if the deals signed had not held on this issue.
“I know the argument was made by some in the private sector that we should just go ahead and sign and give them what they wanted,” said McLaughlin adding that another problem was that the demands can be replicated infinitely.
“We can sign enough deals to get off this list but you can be sure there will be another list after that and then another list and another. So it is important to be sensible about the concessions you make. Where you do make concessions we need benefits otherwise we are going to wind up in a situation where other jurisdictions become more attractive because they will have the benefits,” McLaughlin added.
He acknowledged that now he did not know the final parameters of the two new deals signed this week and, as yet, the current government has not provided the information regarding the details of the deals. But McLaughlin said he hoped that the new negotiating team had been briefed and stuck firm to holding those red lines.
According to the final DTA that was signed with the UK (now posted on the HM Treasury website) it states that it will apply from April 2010. However , it does not specifically state that it could not apply retrospectively if an enquiry made in the tax year starting April 2010 was connected to previous years.
McLaughlin said that despite the struggle to maintain the red lines they had also met with beneficial propositions along the way. The former minister said that most of the states his team engaged with were willing to offer some form of commercial benefit in return for a bilateral TIEA.
McLaughlin also said that given the enormous amount of work that the civil servants leading the technical team had put in and the knowledge that Deborah Drummond and Chris Rose had about this matter it was surprising they were not directly involved in the current negotiations.
Category: Business
Dear Anonymous,
I personally had the opportunity to hear Mckeeva say on the Rooster talk show in May 2009 that, "you only need COMMON SENSE sense to run this country" which of course implied that one does not need an EDUCATION to do so, is in itself a DETRIMENT to this country, its citizens, our country’s reputation, as to how the international opinion that will be formed. What also concerns me, and it should do you too, to all other Caymanians, is this; This is his view/opinion, is this why he has failed to correct and/or improve our schools and education standards over the majority of the past 20+ years??? Now, can you intelligently access this current situation that is now in his hands and rest at ease that he have the intelligence to make the right decisions that would best protect and serve the needs of our country & its people?????
I too wish that you had taken the time to investigate and learn what our previous govt was obligated to do in order to run this country effectively. I pray that you will continue to be encouraged to keep abreast of what is happening in our country and will remember to vote with greater intelligence when the elections in 2013 arrives (no offense meant). I challenge you to continue to educate yourself on all matters that concern our country. I emplore you to share your knowledge with others that may be of the same opinion as you once previously had.
However, here’s one reassurance that you need to be aware of. Under the new Constitution, the people (Electorates) will be empowered to call a Referendum whenever we have serious & reasonable grounds to do so. If this present govt becomes a grave concern to the stability of our country, then this is the correction tool we need to use.
Yours sincerely,
Your fellow Caymanian, Wes’ Bay-a.
I wish that all of the complicated issues around these agreements had been explained before the election. The panic and hype from CIFSA made it sound like the previous government was doing nothing and that it was easy to get these agreements and that there was no downside to them. It is only after the election that we are learning that there are serious and complex issues involved, and that the previous government was working hard (but maybe too quietly) to protect Cayman and that there are huge risks for Cayman if these agreements are not done right.
It is becoming clear that the previous government was hard work and no hype in order to protect Cayman and now I am fearing that we have chosen the opposite. I wish I would have known this before the election as it is substance and not hype that will keep the good ship Cayman afloat. Knowing the facts would have helped me to vote right.