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Grant Stein, global managing partner, Walkers

Opinion: Fiscal transparency in the Cayman Islands

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In the first of two articles, Grant Stein (pictured), global managing partner of international law firm Walkers, argues that contrary to popular stereotypes, the Cayman Islands are not only fully committed to tax transparency and information-sharing but are actively involved in the OECD’s decision-making process for shaping international standards in this area.

Demand for an increasingly open, accountable and transparent government and regulatory system is as strong in the Cayman Islands as it is in the US and other G-20 nations. Despite the dated stereotype clung to by critics, usually based on subjective and flawed information and/or methodology, Cayman has promoted transparency regulations and initiatives for some time, and negative attitudes toward the islands are undeserved.

A proper and objective analysis of the compliance legislation, guidance and policies in place and the international co-operative agreements that promote extraterritorial assistance in legal proceedings and information sharing reveals why Cayman is highly regarded by international standard-setting bodies such as the Organization for Economic Co-operation and Development, Financial Action Task Force and International Monetary Fund.
 
Cayman is also on the G-20’s ‘white list’ of compliant jurisdictions. It is generally accepted that investors and financial institutions are entitled to a legitimate degree of privacy in their affairs whether they are doing business in New York, London or Cayman. However, the reason that Cayman remains such a successful centre for financial services is that it provides a pro-business, cost-efficient, tax-neutral platform for international payment flows within a regulated environment that meets international standards.
 
The islands are at the forefront of shaping international standards for tax transparency. Legislation has been enacted and measures implemented to facilitate the exchange of relevant information. The Cayman regulatory authority has access to comprehensive and reliable data from any person with relevant information. Stringent anti-money laundering legislation has been in place for many years and has outpaced many other major onshore financial centres.
 
Taxpayers’ rights are protected by legislation that supports government accountability, transparency and public participation in decision-making. Confidentiality laws strike the right balance of protecting privacy in business dealings while providing a mechanism for information to be passed to law enforcement and regulatory authorities inside and outside
the jurisdiction. It is clear that Cayman embraces the need to foster global standards in a responsible and professional manner, and the desire for transparency is no exception.
 
The OECD is spearheading the international fight against cross-border tax evasion with a three-year plan to improve tax transparency and exchange of information. Cayman fully supports this mission and was part of the global forum that met in Mexico last year to discuss progress in implementing international standards. With 13 other countries, Cayman was elected a member of the OECD steering group to assist in the restructuring of policy for the global forum.
 
The global forum is the final decision-making body for OECD matters. This means that Cayman is actively involved in helping to shape international standards for tax transparency. Its work includes participation in key initiatives such as reviewing the findings of a peer review group tasked with reviewing and monitoring the development and adequacy of regulatory regimes on a country-by-country basis. Jurisdictions that fail to implement the standards will beprovided with guidance on what changes are needed and a deadline to report back on the improvements they have made.
 
Cayman’s involvement at this level is not only evidence of its active commitment to the cause, but puts it in an ideal position continually to monitor its own compliance. The latest OECD progress report of March 22 confirms the jurisdiction has “substantially implemented the internationally agreed tax standard”. As a member of the steering committee, Cayman will be at the forefront of developments in this area and can ensure that it remains conversant and compliant with internationally-agreed standards.

 

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