Bush requests transparency upgrade

(CNS): The Cayman Islands Premier and Minister of Finance has revealed the steps that the jurisdiction has taken to address recommendations made during a review in connection with meeting OECD standards on financial transparency. Speaking in Bermuda at the 3rd meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes, McKeeva Bush explained that Cayman had enacted relevant legislation and has now requested a supplementary report to upgrade the findings of the islands’ first review under the peer system adopted by the forum. While in Bermuda the government delegation also initialled a proposed tax agreement with China

The premier, who spoke this morning, explained that legislative amendments had been made to the companies, partnerships and trusts laws to require the retention of relevant accounting records (including underlying documentation) for a minimum period of five years, including enhanced sanctions for non-compliance in line with the international standards.

In accordance with the Revised Methodology for Peer Reviews and Non-member Reviews, Cayman has requested a supplementary report seeking an upgrade of the determination in the Phase 1 Peer Review of the essential element relating to accounting records. It is expected that this supplementary report will be examined by the Peer Review Group at the earliest opportunity, officials stated in a release from the ministry of finance.

Bush also reported that the Cayman Islands is currently reviewing the remaining recommendations contained in the Phase 1 Report with a view to determining the best manner in which to address these in advance of its Phase 2 Peer Review, which will focus on the practical implementation of the international standard and the effectiveness of exchange of information.

“My government is committed to doing our part in advancing the international standards of the Global Forum – evidenced by our participation over the past 11 years,” Bush said. “The Cayman Islands will be hosting the next Global Forum Peer Review Group Meeting in July, and are pleased to welcome over 40 jurisdictions to our shores.”

Government officials said Cayman has played an integral role in the restructured Global Forum, Steering Group and the Peer Review Group, and to date has provided assessors for five peer review evaluations. The release said the Cayman Islands had a favourable assessment during Phase 1 of the Peer Review Process and is expected to undergo its Phase 2 in the second half of 2012.

While in Bermuda delegates also initialled a Tax Information Exchange Agreement (TIEA) between the Cayman Islands and the People’s Republic of China. “The Cayman Islands currently has 23 TIEAs in place with relevant partners – the most recent with the Republic of South Africa having been signed in early May – and we will continue to enhance our tax transparency regime through increased cooperation efforts such as this one,” said Samuel Bulgin, the attorney general and member of the Cayman Islands International Tax Cooperation Team.

Meanwhile, as offshore jurisdictions were touting their transparency credentials at the forum which played host 220 delegates from 85 member jurisdictions and 11 international organisations, pressure group Global Financial Integrity (GFI) criticised the OECD global standard for tax information exchange which GFI Director Raymond Baker said fell far short of what is needed.

“National tax authorities continue to be constrained by the current OECD tax information exchange standard, whereupon information is only shared on request. Basically, tax evaders have the advantage under the current system of on-demand tax information exchange,” he said in reaction to the Bermuda meeting.

It is estimated by GFI that individuals have about US$12 trillion of assets in jurisdictions other than their own countries of residence that are not declared in their own countries with lost tax revenue from these undeclared assets estimated at $255 billion.

“Automatic exchange of tax information would help tax collection in developed and developing countries,” added Baker. “Additional measures that would help curtail illicit capital flight, corruption, and tax evasion include requiring all multi-national corporations to report sales, profits, and taxes paid in all jurisdictions and harmonization of money-laundering statutes globally.”

See the phase one review of the Cayman Islands here