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Tuesday, February 18, 2020
The European Union has added the UK overseas territory of the Cayman Islands to its tax haven blacklist. Oxfam (an organisation that supports high taxation) said this move was encouraging, but many more countries should be blacklisted. In addition to the Cayman Islands, the EU has added this year Panama, Palau and the Seychelles to their blacklist.
The Cayman Islands have no income tax, capital gains tax or corporation tax, and the EU claims they do not take appropriate measures to prevent tax abuse – they allow people to register there despise not having presence in the Cayman Islands.
It is important to note that the EU didn’t suggest that they Cayman Islands isn’t cooperating with the EU or has a major transparency problem. Their reasoning was short: “Cayman Islands does not have appropriate measures in place relating to economic substance in the area of collective investment vehicles.”
Cayman Islands premier, Alden McLaughlin, said he had already contacted the EU about the process of being removed from the blacklist. A lobby group for the Cayman financial service industry said this reversal will hopefully happen in “the not to distant future”. Opposition and industry representatives have expressed support for this dialogue.
Chris Saunder, an opposition spokesman, told: “Like many, I too have questions regarding the actions or inactions that led to this blacklisting by the EU. As previously stated, the primary focus at this time is to not find blame but rather that we all work together to restore Cayman’s well-earned reputation as a highly regulated jurisdiction that is a good place to do business.”
Jude Scott (Cayman Finance CEO) said: “Just as approximately 30 other jurisdictions were removed after taking the necessary actions, we look forward to the same happening with regard to the Cayman Islands. In the meantime, clients can continue to expect the usual high professional standards from their Cayman service providers that they have always received.”
People from blacklisted countries face difficulties accessing EU funding programmes. While being on the EU blacklist is not a cause for immediate panic, it does mean that companies using Cayman entities may be subject to additional requirements by EU member states, and European companies doing business in the Cayman Islands have to take additional measures.
The EU started this list in 2017 to put pressure on tax havens. Oxfam said other British territories (like the British Virgin Islands), and even some EU members deserve to be on the list.
The organisation said: “While its is encouraging that the Cayman Islands has finally been added to the blacklist, the list itself still proves wholly inadequate. The EU needs to strengthen its blacklisting criteria, put its own house in order and push for an ambitious and effective minimum tax rate at global level.”