COT Leaders agreed on a December 15 deadline for the completion of an economic impact report, but two weeks hence, it is found that the ...
EU Tax Study Delayed
There has been an almost two-week delay in the vital study which the Caribbean Overseas Territories (COT) commissioned to determine what impact the proposed European Union (EU) Draft Directive on the Taxation of Savings Income will have on their economies.
Professor James Mirrlees
The economic impact study was due to be completed by December 15, but up until the afternoon of December 27, 2002, there was no indication that the report was completed, or if it was, that it had been submitted to the relevant authorities.
After a meeting in Grand Cayman on November 22, 2002, the COT (Anguilla, British Virgin Islands, Turks and Caicos, Montserrat and the Cayman Islands) issued a communiqué which stated that the report would be "available for proper consideration" by mid-December.
When Cayman Net News contacted Ms. Lorna Smith, Head of the BVI's Financial Secretariat about the study, she directed this newspaper to Dr. Christopher Rose, Executive Director of the Cayman Islands' Financial Secretariat. Dr. Rose subsequently referred reporters to this country's Attorney General David Ballantyne who stated that the study was being undertaken in England by Professor James Mirrlees, a 1996 Nobel Laureate for Economics.
If the report is not submitted by Tuesday December 31, 2002, it will have also missed another important deadline specified by the Feira Accord.
This Accord stemmed from a meeting held in Feira, Portugal in June 2000, when the European Council agreed to focus the directive instead on introducing automatic exchange of information on savings income of individuals resident in EU Member States on as wide a basis as possible.
Communication of information would be automatic and take place at least once a year, within six months following the end of the tax year of the Member State of the paying agent.
Member States are required to bring into force the laws, regulations and administrative provisions necessary to comply with the directive by 1 January 2004 at the latest.
The original 1997 savings tax proposal foresaw a general withholding tax across the EU, to apply to savings accounts and debt instruments such as eurobonds held by private non-residents; institutions were exempted.
Worried about the damage this would do to its Eurobond market, the UK fought a successful rearguard action in the form of the Feira Accord.
However, until the proposed directive has been both adopted and implemented, Member States may either exchange information on savings income with other Member States or operate a withholding tax on condition that they implement exchange of information at the latest within seven years after the Directive is adopted.
The directive depends on getting the USA and other key countries such as Switzerland, Liechtenstein, Monaco, Andorra and San Marinoto adopt "equivalent measures" and to getting EU dependent or associated territories to adopt 'the same measures', all by the end of this year.
The dependent or associated territories are named as the Channel Islands, the Isle of Man and those in the Caribbean, except for Bermuda, which the European Commission apparently did not realise was a COT at the time of drafting.
Once they have sufficient reassurances about application of the measures in COT and third countries, Member States are to vote unanimously whether to adopt the Directive, triggering exchange of information within seven years.
The target date of 31 December 2002 was set for adoption, which means the European Commission and the EU Member States are under pressure to get COT to fall in line by then.
The UK's Chancelleor of the Exchequer Mr. Gordon Brown last month gave the European Council his "unequivocal assurance" that automactic exchange of information will be introduced in the COT, stressing that the United Kingdom would legislate if they faield to open their book.
However, Leader of Government Business, the Hon. McKeeava Bush, has vowed to fight the proposals and has remained adamant that the Cayman Islands will not sign because it was not in its interest to do so.