Cayman Islands on OECD white list for tax transparency

The Cayman Islands has moved onto the OECD 'White List' after signing its twelfth tax information exchange agreement (TIEA) with New Zealand in Washington.

With this deal the Cayman Islands become compliant with international tax transparency standards and meet the OECD's minimum requirement set in April at the Group of 20 meeting in London. To be compliant with international tax transparency standards and show a commitment to the criteria, a country must have as least 12 TIEAs signed.

Cayman expects to have more TIEAs in place through unilateral mechanism agreements with Japan, Germany, South Africa, Austria, Belgium, the Czech Republic, Switzerland, Luxembourg and the Slovak Republic, according got offshore law firm Ogier's Cayman office.

The OECD said the unilateral agreements are "imaginative and innovative" but a decision on the formal acceptability of this mechanism is not expected before the OECD's global tax forum meeting in Mexico in September 2009.

The unilateral mechanism agreements were introduced by Cayman in late 2008 to overcome delays in putting bilateral agreements in place, explained Ogier. The basis of the unilateral agreement is the government of Cayman's commitment to disclose information to any listed country on the terms of the model TIEA used for the bilateral agreements. If the unilateral mechanisms are accepted, it would bring the total number of TIEAs to 21.

At the same time Cayman is negotiations are advanced on bilateral agreements with Italy, Mexico, Germany, France, Australia, Portugal and Canada.

The Cayman government is confident it will be able to ensure the smooth operation of the TIEAs. The island's Tax Information Authority was established after Cayman signed its first TIEA with the US in 2001, the first TIEA by any offshore jurisdiction.

"I have heard anecdotal evidence that Cayman law firms are losing 30 to 50 per cent of new deals. While I don't exactly how much of this is due to being on the grey list, this is an attrition rate that Cayman cannot sustain," said Anthony Travers, chairman of the Cayman Islands Stock Exchange, was recently appointed as the president of the Cayman Islands Financial Services Association. His remarks were made at a meeting of the Cayman branch of the Alternative Investment Management Association (AIMA).

In June the Cayman Islands Monetary Authority (CIMA) became an ordinary (or full) member of the International Organisation of Securities Commissions (IOSCO). This came after the authority had signed a multilateral memorandum of understanding committing it to co-operation and exchange of information with international regulators.

IOSCO is the organisation that sets international standards and practices for securities regulation and was given the task of reducing global systemic risk by the G20.

IOSCO membership is important to Cayman's financial services industry, noted Ogier in a recent report. The deal opens doors to some international markets that were previously closed to direct investment by Cayman funds.

For example, it is expected that Cayman funds which invest in India should now have the option of being registered as a foreign institutional investor with the Securities and Exchange Board of India rather than investing through intermediary funds based in another jurisdiction or through participatory notes issued by others (news article, July 23, 2009).