Cayman Islands Responds To Its Inclusion On The EU Blacklist

The European Commission has included the Cayman Islands on a list it has now published of the top 30 ‘non-cooperative’ jurisdictions.

The list includes those jurisdictions that are blacklisted by at least 10 member states of the EU.  This has led to some other intriguing inclusions on the list with jurisdictions such as Bermuda, the British Virgin Islands, Hong Kong, Guernsey, Liechtenstein and Monaco all being included on the list.

The list is supposed to reflect how different jurisdictions apply standards of tax governance, including “transparency, exchange of information and fair tax competition.”

The Platform for Tax Good Governance led the analysis and utilised information provided by EU member states. The platform’s purpose is to help develop initiatives to promote good governance in tax matters in third countries, to tackle aggressive tax planning and to identify and address double taxation.

The European Commission have confirmed that the list will be updated once a year to reflect changes to the individual blacklists of the EU member states although it is not yet clear what other purpose the list will serve. Belgium, Bulgaria, Croatia, Estonia, Greece, Italy, Latvia, Lithuania, Poland, Portugal and Spain all blacklisted the Cayman Islands and the Cayman Islands Government said the following in response:

• “The national blacklists that have resulted in this overall blacklisting are primarily generated by European countries that are not major economic trading partners of the Cayman Islands. These countries therefore may not be aware of Cayman’s adherence to standards, both in terms of our bilateral and multilateral agreements for exchange of information”;
• “Save for Bulgaria, [the Cayman Islands has] EOI mechanisms with all of the jurisdictions that have blacklisted Cayman”; and
• “It is unfortunate that the EU blacklist unfairly downplays the significant strides made by Cayman, as well as the significant global accomplishments in the area of transparency”.

In addition, an email signed jointly by the Director of the OECD Centre for Tax Policy and Administration (“CTPA”), and the Head of the Global Forum Secretariat was circulated on 19 June 2015 to the 126 members of the OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes (including the Cayman Islands) in relation to the European Commission's 'blacklist' and stated as follows:

• 'As the OECD and the Global Forum we would like to confirm that the only agreeable assessment of countries as regards their cooperation is made by the Global Forum and that a number of countries identified in the EU exercise are either fully or largely compliant and have committed to AEOI, sometimes even as early adopters'; and
• 'Without prejudice to countries' sovereign positions, we are happy to confirm that these jurisdictions are cooperative and we would like to commend the tremendous progress made over the past years as well as the cooperation and integrity of the Global Forum process'.

It remains to be seen whether and, if so, to what extent the publication of this blacklist will impact upon the European Securities and Market Authority’s upcoming decision on 22 July 2015 as to whether the passport regime under the Alternative Investment Fund Managers Directive will be extended to non-EU funds and managers and, if so, to which jurisdictions. We will continue to monitor developments over the next quarter when, hopefully, we will have some clarity on the real purpose and impact of the blacklist and whether it is likely to have any detrimental effects on the Cayman Islands or its ability to become a beneficiary of the passport regime. The Cayman Islands already meets all applicable international standards and, in our view, our clients should not be concerned with continuing to use the Cayman Islands as their offshore jurisdiction of choice despite the rather ominous sounding blacklist having been published.