Cayman Islands sheds its tax haven image
The 2013 Organization for Economic Cooperation and Development (OECD) peer review report states that Cayman Islands has developed its standards rapidly, and has proven its long-standing commitment to adhering to the highest standards of regulations.
KUALA LUMPUR, Nov 10, 2014:
The often scrutinised Cayman Islands — having long been associated as a hot bed for international companies and corporations seeking to avoid taxation — has shed its shady image in the last five years.
The British Overseas Territory government’s primary source of economy directly lies in indirect taxation (whereby there is no income tax, capital gains tax or corporation tax).
Its government has steadily improved its manner of standard taxation practice, having joined the “white list” of the Organization for Economic Cooperation and Development (OECD) since 2009.
OECD’s 2013 peer review report states that since then Cayman Islands has developed its standards rapidly and has proven its long-standing commitment to adhering to the highest standards of regulations.
“The islands have since demonstrated that standards for transparency and tax information have been properly implemented, and that the territory exchanges tax information effectively in practice.
“The peer review finds that the exchange process is very well organised with many internal processes in place for handling exchange of information, with high quality responses being provided to partner jurisdictions,” the report stated.
Signalling its true commitment to the global cause, Cayman Islands had signed 12 bilateral tax agreements in line with OECD standards to be off its “black list”.
The report also stated that the Cayman Islands has a well-developed legal and regulatory framework.
In respect of access to information, the competent authorities of the Cayman Islands are invested with broad powers to gather relevant information.
This means that internationals companies seeking to register their business or even invest in the Caribbean island’s multiple financial institutions will be known by the respective governments.
This is because the regulations and supervision of the financial services industry falls under the responsibility of the Cayman Islands Monetary Authority (Cima).
The move by the government of Cayman Islands, together with fellow United Kingdom protectorate, British Virgin Islands, has since assured world governments to place full trust in them and also not to be labelled as non-cooperative centres.
Non-cooperative centres are financial centres accused of harbouring foreign tax escapees who pipe in cash in the billions of US dollars, out of reach of their home authorities.
As such, Cayman Islands, which has the largest value of assets under management in offshore funds and has also the strongest presence in the U.S. securitisation markets, continues to be a viable option for governments to invest their finances with US$1.5 trillion (RM5.01 trillion) in banking liabilities.
It has become the fifth-largest banking centre in the world.
In fact, Cayman Islands’ road towards shedding its tax-evasive image had been taken from 2005, when a report published by the International Monetary Fund (IMF) stated that the overall compliance culture within Caymans was very strong, including the compliance culture related to anti-money laundering obligations.
IMF officials, in conducting a thorough assessment on Cima’s supervision and regulations in the Cayman Islands’ banking, insurance and securities industries, as well as its money laundering regime, recognised the jurisdiction’s comprehensive regulatory and compliance framework.
“An extensive programme of legislative, rule and guideline development has introduced an increasingly effective system of regulation, both formalising earlier practices and introducing enhanced procedures,” IMF assessors said.
