TJN report biased, says CIG

(CNS): Although the Cayman Islands government said it has engaged in dozens of third party reviews regarding the country’s financial services industry, it has admitted that it chose not to participate in the Tax Justice Network (TJN) secrecy index review as the organisation has a stated bias against offshore financial service centres. The report, which slams the Cayman Islands for its secrecy, says that the jurisdiction achieved a positive result on only one of the 12 criteria that it used to measure secrecy and it has given the jurisdiction a score of only 8% when it comes to transparency.

Ted Bravakis said that the CIG has supported many reviews of its financial sector and continues to do so, especially in the context of the global financial situation and when conducted by objective experts and academics. However, the TJN has made no secret that it is fundamentally opposed to offshore financial centres and therefore, Bravakis explained, the CIG made a policy decision not to engage with this particular review as it was clear it would not be objective.

“We have been involved recently in reviews by the IMF, FATF, CFATF, the US GOA and most recently the UK Treasury review by Michael Foot, all of which were conducted with certain expertise and relative objectivity and which have offered far more positive results. We must therefore consider the criticisms of this latest review in that context,” he added.

The report, which was published today and looks at levels of secrecy in 60 jurisdictions, ranked Cayman as the 4th most secretive financial centre in the world, behind Delaware, Switzerland and Luxemburg. The TJN said the index helps bring into focus jurisdictions such as the Cayman Islands that “specialize in subterfuge”. 

The organisation also explained why it focused on transparency and opacity in its review of what are more commonly known as tax havens. “We know from our extensive research that the core selling point of what are popularly known as ‘tax havens’ is not tax, but secrecy. Tax considerations, and others, are always secondary to the provision of secrecy,” TJN said.

The report states that it has made its assessment of Cayman based on 12 indicators reflecting legal and financial arrangements in the jurisdiction, and the only one for which it received a positive score was its participation in the European Union Savings Tax Directive. It stated that the information on Cayman came from regulatory reports, legislation and regulation in force at the end of 2008.

However, of the 12 questions asked about secrecy, the report answers negatively without being entirely reflective of the real circumstances in the jurisdiction. For example, in its third question the TJN report says Cayman does not comply sufficiently with international regulatory requirements, which, it states, is based on FAFT standards but does not explain that Cayman has received largely compliant ratings from that international financial regulator.

It also said at criteria 9 that Cayman had“too few tax information agreements”. Even though the Cayman Islands has now signed 14 bilateral agreements and one unilateral agreement that offers some 20 countries access to tax information and has been moved to the OECD white list, the index does not take that into consideration. The reason being that the index sets a minimum of 60 bilateral treaties with other countries as a basis — a considerable difference from the OECD’s own standard of 12 and a further indication of the opposition the TJN takes to offshore centres.

The index bases its assessment of Cayman on several other factors as well, which it believes make the jurisdiction particularly opaque, including banking secrecy, not revealing details of trusts on public record, not requiring that company accounts be available on public record, not requiring that beneficial ownership of companies is recorded on public record, that it does not maintain company ownership details in official records, inadequate access to banking information, that it permits company redomiciliation, that it allows protected cell companies, and finally that Cayman did not respond to Tax Justice Network requests for information.

“The Cayman Islands are a long way from offering financial transparency,” the report states. “If it is to play a full part in the modern financial community and wishes to impede and deter illicit financial flows, including flows originating from tax evasion, aggressive tax avoidance practices, corrupt practices and criminal activities it should take action on the points noted where it falls short of acceptable international standards.”

Cayman’s scores on the TJN