Cayman Islands: Government Of The Cayman Islands - Cayman Islands Recognised By The OECD As A Co

UK and OECD Applaud 'Advance Commitment' Following

OECD Council Meeting in Paris

19 June, 2000 – Grand Cayman – The Cayman Islands reinforced its position as a major international financial centre through constructive engagement with the OECD, leading to recognition of the Cayman Islands as a cooperative jurisdiction. The commitment to embrace international standards for transparency and exchange of information means that the Cayman Islands will not appear on the OECD list of 'tax havens' to be published following the next meeting of OECD Ministers on 26 June.

Following meetings which culminated in May of this year, the Cayman Islands Government entered into an 'advance commitment' with the OECD aimed at assisting in the international initiative to combat 'harmful tax practices'. The discussions took into account the OECD's Report on Access to Bank Information, which confirms the legitimate role for bank secrecy in protecting the confidentiality of financial affairs and in maintaining the soundness of banking systems.

"As a major international financial centre, we are committed to maintaining a well-regulated financial services industry which meets the highest international standards. This extends to our private sector associations, which were actively consulted on the OECD discussions and supportive of the commitment given," said Hon. George McCarthy, Financial Secretary of the Cayman Islands. "The outcome with the OECD demonstrates what can be achieved through sustained, constructive engagement."

The most important elements of the 'advance commitment' provide a time frame for effective exchange of information on tax matters, with implementation scheduled over a three to five-year period. The Cayman Islands has committed that:

  • The effective exchange of information for criminal tax matters shall become effective for the first tax year after December 2003, and for civil and administrative matters for the first tax year after December 2005.
  • The implementation of this commitment shall require that information be provided only pursuant to a specific request, and where such request is relevant to a tax examination or investigation conducted in accordance with the laws of the requesting state.
  • Requests will be submitted by foreign tax authorities to a competent authority in the Cayman Islands who will act in a capacity similar to that in which the Cayman Islands Chief Justice has acted pursuant to other international exchange agreements.
  • Confidentiality provisions will ensure that information that has been exchanged is adequately protected from unauthorized disclosure.

The 'advance commitment' also addresses transparency issues such as continued vigilance regarding 'Know Your Customer Rules' and ensuring that bearer shares, if allowed, are not abused. In addition, other actions include a policy directive to be issued by the Cayman Islands Government advising financial services providers against the use of aggressive marketing policies based primarily on confidentiality or secrecy.

"It is clearly understood and accepted by the OECD that our commitment letter relating to 'harmful tax practices' does not affect the right of the Cayman Islands to maintain its tax-neutral regime and its indirect form of taxation," said Minister Truman Bodden, the leader of the Cayman Islands Government delegation. "We believe that this commitment will enable us to achieve an effective balance between appropriate assistance to international tax authorities and protection of the rights of investors and depositors to maintain legitimate confidentiality," added Bodden.

The Cayman Islands, a United Kingdom Overseas Territory, is one of the ten largest financial centres. Forty-three of the world's top 50 banks have licensed subsidiaries or branches here. The financial services sector includes banking, mutual funds, insurance, company management, vessel registration, structured finance and the Cayman Islands Stock Exchange.

Six jurisdictions join OECD members in committing to eliminate harmful practices

The OECD is pleased to announce that six jurisdictions have joined OECD member countries in committing to eliminate harmful tax practices. The jurisdictions are Bermuda, the Cayman Islands, Cyprus, Malta, Mauritius, and San Marino. The texts of their letters of commitment are available on the OECD's website. Though they differ somewhat in form, all these letters represent a full commitment to eliminate harmful tax practices by the end of 2005, embracing international tax standards for transparency, exchange of information and fair tax competition. The OECD welcomes these commitments.

There will be a further announcement about the OECD's work on harmful tax practices next Monday 26 June. At that time the OECD will publicly release its Report on Progress in Identifying and Eliminating Harmful Tax Practices.

A news conference with regard to the release of the Tax Competition Report will be held at 1pm on 26 June at OECD headquarters (2, rue André Pascal, 75016 Paris)

For further information, and to register for the news conference, please contact Nicholas Bray in the OECD's Media Relations Division

Notes to Editor

The work of OECD Forum on Harmful Tax Practices was mandated by a 1998 report, the OECD Report on Harmful Tax Competition. Its objective is to identify and eliminate tax practices, both in OECD countries and outside the OECD area, that have a distorting effect on trade and investment for geographically mobile income.

As part of this work, the Forum has engaged over the past two years in extensive factual review and dialogue with a number of jurisdictions initially identified for review as possible tax havens. The Forum has also been reviewing OECD Member country regimes to identify harmful tax practices.

Under the terms of the 1998 report, a tax haven is a jurisdiction that: (i) imposes no or only nominal taxes (generally or in special circumstances) and (ii) offers itself, or is percieved to offer itself, as a place to be used by non-residents to escape taxation in their country of residence and (iii) possesses one or more of three confirming criteria for engaging in harmful tax practices. Those confirming criteria are: 1) lack of effective exchange of information; 2) lack of transparency; and 3) attracting business with no substantial activities. These criteria are consistent with the nature of the tax poaching schemes that are the object of the OECD's work: schemes that impede the ability of home countries to enforce their own tax laws. The confirming criteria for identifying a harmful preferential tax regime are similar to these. The commitments made by the six jurisdictions would ensure that effective exchange of information and transparency are achieved in those jurisdictions, and that their regimes are not designed so as to attract business with no substantial activities.

In the next stage of its work, the Forum will publish on June 26 a list of jurisdictions that it considers to qualify, under this definition, as to tax havens, and also will report on its review of OECD member country preferential regimes. Also, on Thursday of next week, the OECD with the French Minister of Finance Mr. Fabius will launch a global dialogue on harmful tax practices. This high level Symposium will bring together the 29 Member countries and 30 other countries to discuss how to develop a global response to the challenges of harmful tax practices.

19th June, 2000

Dear Colleague

Organisation of Economic Co-operation and Development ("OECD")

Harmful Tax Competition

Approved Offshore Jurisdictions

I am writing to you to draw to your attention the Press Releases of both the Cayman Islands Government and the OECD in relation to the lists that will now be published following the two year review by the OECD of offshore jurisdictions and "harmful tax competition".

Although certain aspects of the OECD position on "harmful tax competition" may be described as highly subjective, the common ground between the Cayman Islands and the OECD is now that information will be exchanged in relation to tax matters by including exchange of information in relation to criminal and, ultimately, civil tax matters within the pre-existing anti money laundering legislation. You will see from the enclosed Press Releases that information is agreed to be exchanged in relation to criminal tax matters with effect from the first tax year after December 2003 and in relation to civil tax matters with effect from the first tax year after December 2005.

The effect of this commitment is that the Cayman Islands are today on the OECD list of six jurisdictions which have committed to eliminate harmful tax practices and will not, therefore, appear on the OECD "blacklist" of tax havens to be published by the OECD on 26th June, 2000. The "blacklist" jurisdictions will, it is indicated, ultimately be subject to OECD sanctions after a twelve month period.

There are, nevertheless, distinctions between the six jurisdictions, most notably with Bermuda which has already amended its laws to include within the definition of "suspicious transaction" reporting the overseas commission of a tax offence. That is not the case in the Cayman Islands which proposes to provide information in the relevant tax year pursuant to a specific request of the appropriate tax authority under a Mutual Legal Assistance Treaty ("MLAT") disclosure mechanism. In effect, the Cayman Islands undertaking is to amend the Cayman Islands MLAT and to extend that treaty network to include tax offences within the definitions of "money laundering". This, however, will be a reactive not proactive reporting obligation.

We will be pleased to give specific advice in relation to the amendments to Cayman Islands legislation as and when these are tabled pursuant to the above mentioned commitment.

With kind regards,

Yours sincerely

A.B. Travers OBE

Senior Partner

28th June, 2000

Dear Colleague

OECD: Approved Offshore Jurisdictions

I am writing to you again to clarify certain questions that may have arisen in connection with the Cayman Islands tax regime following recent press reports in Tokyo on the OECD list of approved offshore financial centres. The position with regard to Cayman Islands law and regulation is as follows:

  1. There is no intention on the part of the OECD nor any agreement by the Cayman Islands Government that would change the zero tax regime in the Cayman Islands. A zero tax regime is only regarded as "harmful" by the OECD if it is coupled with other features, particularly non transparency.
  2. Accordingly, the changes agreed by the Cayman Islands Government with the OECD will enable a foreign tax authority to obtain information from within the Cayman Islands on a tax enquiry on establishing a prima facie case with the relevant Cayman Islands Authority. In relation to foreign criminal tax matters this procedure is to apply with effect from the first tax year following 31st December, 2003.
  3. The Cayman Islands Government raises its revenue by indirect taxation (e.g. customs duties, import duties, stamp duty on real estate transactions etc.) and remains fully committed to its zero direct tax regime. The OECD recognises that the methodology of the imposition of such taxation is a sovereign right and that no change is proposed.
  4. The Cayman Islands Government will shortly announce a package of proposed legislative changes including:

    1. the independence of the Cayman Islands Monetary Authority; and
    2. mandatory compliance with the anti-money laundering Code of Conduct by Cayman Islands professionals,

that will either meet or exceed the regulatory standards newly introduced by the Financial Stability Forum and the Financial Action Task Force and which will secure a favourable listing for the Cayman Islands. This is an ongoing process.

I hope that the foregoing information will be of continued assistance.

With kind regards,

Yours sincerely

Anthony Travers, OBE

Senior Partner

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions