Cayman faces new EU blacklisting

MEP Paul Tang

(CNS): The European Parliament is planning a new blacklist of tax havens and the Cayman Islands appear to be the focus of the move. While local political leaders here went into much of the effort over the past year to blacklist this jurisdiction, MPs believe the elimination of Cayman mocks the concept. As a result, they have voted for new criteria to re-blacklist Cayman and other places with zero tax rates on corporate profits.

The reform of the blacklist of tax havens was discussed at a meeting of the EU Subcommittee on Taxation (FISC) in early December, and the removal of the Cayman Islands list in October was a major issue. During his introduction to the meeting, Dutch MEP Paul Tang, chairman of the committee, said: “A list of tax havens that do not include the largest tax haven in the world does not really deserve to be named.”

CNS reached out to the Cayman Islands Treasury Department about the recent threat, and officials said the Cayman Islands government will continue to work with the EU on the matter this year, despite travel restrictions.

“The EU listing process has evolved several times since the initiative was launched in 2017. Regarding the vote of the MEPs, we note that they are demanding that the EU Member States also be included in the EU listing process, ”the ministry said.

The ministry said the EU had recognized the importance of dialogue with regulators, including the OECD, in the context of the ongoing work of the listing process at a previous meeting. “The Cayman Islands government notes that the OECD has given our tax system the highest rating as non-harmful,” it said in an email reply.

However, the later meeting’s debate and press release on the issue makes it clear that the discontent with Cayman that has been removed from the list goes beyond OECD standards.

MPs referred to the Tax Justice Network’s research into the 60% of profits that they said go through that jurisdiction and avoid taxation in their countries, compared to the mere 2% that goes through the nations that do are blacklisted. The Cayman zero tax rate problem is the problem.

MPs said the fact that the Cayman Islands were blacklisted during a zero percent tax rate policy was evidence enough and any jurisdiction with a zero percent corporate tax rate or no tax on corporate profits should be automatically listed will list.

In correspondence from CNS, Cayman Finance identified the problem of the EU’s reliance on research by the Tax Justice Network. CEO Jude Scott told board members that “the tremendous trust EU decision-makers have in reports from TJN,” which had fundamental statistical flaws, needs to be addressed.

He said Cayman Finance is seeking assistance from the government’s statistical team or using public funds to fund outside experts to conduct a full analysis of the TJN reports for 2020 in order to give Cayman “a credible basis for contestation and, if necessary, public discrediting, the Cayman Islands TJN ratings ”.

But he added: “To date, we have not received that support.” As a result, he is now seeking assistance from the Cayman Finance Board to self-fund the external experts as he highlighted the urgency of the situation.

Although the FISC has accepted that EU countries are responsible for 36% of tax havens and must also scrutinize all member states, MPs are looking for new criteria to judge whether a country’s tax system is fair. They also said that “the blacklisting shouldn’t just be the result of token optimizations,” a point that will have a direct impact on the Cayman Islands’ main economic pillar.

MEPs have already passed a resolution setting out the changes they would like to see to make the process of listing or deregistering a country more transparent, consistent and impartial. “It also adds criteria to ensure that more countries are considered tax havens and to prevent countries from being blacklisted too quickly,” members said in their press release.

Tang said, “While the list can be a good tool, it is currently missing one essential element: actual Taxhavens.”

Watch the video of the FISC meeting here.

See the resolution and press release in the CNS library.

Comments are closed.