2015- The end of tax neutral jurisdictions
On 18 June 2013, the Progressive led government issued a press release titled, “Cayman’s Action Plan Includes Beneficial Ownership”. The press statement came on the heels of the UK taking over the Presidency of G8, at the 17-18 June 2013 G8 Summit in Northern Ireland.
The most interesting part of the press statement issued by the Cayman Islands Government is the third bullet point, which describes the Action Plan including the Beneficial Ownership. It reads:
“Conduct an assessment of whether a central registry of the beneficial ownership and control of companies is the most appropriate and effective way to improve transparency in support of domestic legal compliance and the implementation of cross border assistance in accordance with internationally adopted and implemented standards during 2015.”
The full text of the statement is available at:
The mentioning of the year 2015 at the end of the action is the crux of the press statement and reads like a prophecy, once examined in the light of global initiatives that followed the G8 Summit in June 2013.
The fundamental question of course that remains is how did the Cayman Islands Government know in June 2013 that ‘certain’ international standards would be proposed and implemented in 2015?
The UK Government, during its Presidency of the G8 adopted ‘Transparency’ and ‘Tax Compliance’ as two out of the three main goals to be achieved and implemented by the G8 nations collectively.
The UK’s G8 Presidency Report was issued under the signatures of the British Prime Minister David Cameron, who in the cover letter wrote the following remarks about the Public Registry of Beneficial Ownership:
“The first line of responsibility lies with the G8 members ourselves. We need to practise what we preach. And this is exactly what we have done in the UK. We’ve promised to introduce a public register of company beneficial ownership.”
The full report can be read at the following link:
On 26 March 2015, the UK Parliament made a law that would require the majority of UK companies to identify those “persons with significant control” (“PSCs”) over the company and maintain a register of those persons. The publically available PSC register would be fully searchable and freely available online. The Companies would also be required to maintain a PSC register from January 2016 and provide this information to the Companies House for inclusion on the public register from April 2016 onwards.
The European Parliament adopted a resolution on 8 July 2015 (2015/2058(INI) that speaks to the matter of Tax avoidance and Tax evasion by the Multinational Companies (MNC’s) operating in developing countries and involved in profit shifting, thereby depriving the developing countries population of their rightful benefits through tax collection.
The EU Parliament’s resolution also called for information on beneficial ownership of companies, trusts and other institutions to be made publicly available in open-data formats in order to prevent anonymous shell companies and comparable legal entities from being used to launder money, finance illegal or terrorist activities, conceal the identity of corrupt and criminal individuals, and hide the theft of public funds and profits from illegal traffic and illegal tax evasion.
The EU Parliament also called for the establishment, by the end of 2015, of an internationally agreed definition of tax havens, of penalties for operators making use of them and of a blacklist of countries, including those in the EU, that do not combat tax evasion or that accept it. It called on the EU to support the economic reconversion of those developing countries that serve as tax havens.
It also urged Member States with dependencies and territories that are not part of the Union to work with the administrations of these areas towards the adoption of the principles of tax transparency and to ensure that none serve as tax havens.
The EU Parliament decided to enforce this resolution by end of 2015 through its Financial Action Task Force’s (FAFT).
On 18 June 2015, exactly two years after the Cayman Islands Government had issued its statement on the Action Plan to include Beneficial Ownership, the EU placed the Cayman Islands on its Black List of countries that are considered ‘tax havens’ by the corporations and individuals involved in international tax evasion and tax avoidance.
EU Economic Affairs Commissioner Pierre Moscovici told a news conference while announcing the Black List:
“The publication of the blacklist was a “decisive step” that would “push non-cooperative non-EU jurisdictions to be more cooperative and adopt international standards.”
Following the directives of the G8 Summit in June 2013, ‘The Base Erosion and Profit Shifting’ (BEPS) action plan was published by the OECD on 19 July 2013.
The two year action plan of the OECD that contained 15 action points also included setting up of the public registry of beneficial ownership in the OECD countries and adoption by their dependent territories through legislative reforms.
The recently concluded G20 Summit in Turkey (15-16 November 2015) was held in the wake of terrorist attacks in Paris, France. The G20 leaders gave a strong message against the global threat of terrorism and the misuse of global financial institutions in terrorist funding.
The Russian President shared intelligence about companies from over 40 countries including the G8, financing ISIS activities through the multi-billion dollar illegal trade of crude oil from Syria and Iraq by ISIS through Turkey.
One of the key achievements of the G20 Summit of 2015 is the finalisation of the G20/OECD Base Erosion and Profit Shifting (BEPS) Action Plan to reach a globally modern and fair international tax system. The BEPS Action Plan has been adopted and described by the G20 leaders as a unique and prominent example of modernisation efforts in the international tax area through the last decade and has addressed a very comprehensive set of issues to adapt the international tax system to the landslide changes in the way business is done.
It has been very elaborately laid bare the international initiatives being adopted globally in relation to the tax avoidance / tax evasion including profit shifting and possible use of tax evaded proceeds being used for terrorist funding as highlighted in the G20 Turkey Summit.
The Press Statement of the Cayman Islands Government issued in June 2013 and its very clear mentioning of the international initiatives for public registry of beneficial ownership seems to be an acceptance of FAIT ACCOMPLI by the Cayman Islands Government.
The fact of the matter is that in the face of overwhelming efforts by the G8, G20, EU and the OECD to tackle the tax havens most effectively in the year 2015 and now with the matter of terrorist funding emerging on a global scale suggests a stark reality for countries like the Cayman Islands that have developed dependency on the financial proceeds resulting from tax avoidance. Regardless of whatever nomenclature that we may coin, such as ‘tax neutral jurisdiction’, the reality of the situation does not change.
Is 2015 going to be the end of tax neutral jurisdictions such as the Cayman Islands? It’s a question that now seems rather rhetorical, in light of what has transpired during the course of the last two years, since the Cayman Islands Government issued its 18 June 2013 press statement on the matter.
It is time to take our heads out of the sand and face the rather grim reality that stares us in the face. Only price that shall be paid is going to be paid by the Caymanians. The companies will go where the money flows. Perhaps it is time that the Government tell the people of these Islands what awaits them beyond 2015, after all the ‘slip’ in the June 2013 CIG statement gave it all away.
