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A further assaulton the Cayman Islands economy is being waged as countries in Europepressure the United Kingdom Government to capitulate, finding...
Cayman & US vs. TheEU
Under pressureby the United Kingdom Government, the Cayman Islands team whichtraveled to England last week to negotiate its position alongwith other Overseas Territories, in connection with the EuropeanSavings Directive being sought by the European Union.
(l-r) Leaderof Government Business, Hon. McKeeva Bush, Deputy Leader
Hon. Lindford Pierson, Financial Secretary, Hon. George McCarthy,Attorney General,
Hon. David Ballentyne, Speaker of the House, Julianna O'Connor-Connolly
The European Union (EU) countries are seekingfrom the UK and its Overseas Territories an undertaking wherebythe interest earned on savings in Tax Planning jurisdictions suchas Cayman is reported back to countries belonging to the EU sothat it could be taxed. The Cayman Islands as part of the UK,with British Nationality status will therefore be subjected toany agreement the UK signs in connection with this Directive.
It is understood that the United Statesis holding fast and denying the EU the accommodation they seekto make this tax measure available for EU citizens living in theUS. Furthermore, Switzerland the venerable original Tax Haven,and Liechtenstein are both refusing to succumb to the EU requests.
This could be seen as a horrific case ofdé·jà vu for the Cayman delegation, whichtraveled to the UK this past week. A similar situation was thrustupon the local Government of 2000, when they traveled to the USto deal with threats of sanctions, which led to the speedy passageby Members of the Legislative Assembly, of a series of Laws inless than five days, which effectively handicapped the CaymanIslands as a Tax Haven.
In this latest assault on the financialcentre operations of the Overseas Territories including the BritishVirgin Islands, the Turks and Caicos Islands, the British VirginIslands and Cayman, it is expected that these countries must fallin line with the deadline of June 2002 given to the UK by theEU.
Not to be left unscathed is the UK, itselfa member-in-waiting to join the European Union, which complainsthat its economy will be hurt from the controversial Europeansavings tax stemming from a 1997 EU minister agreement.
This included a Code of Conduct for Business,to eliminate special tax regimes such as the Cayman Islands, whichconstitute harmful competition and a proposal for a directiveon interest income from savings.
The immediate fear for the UK is that ifa "withholding" tax on savings - meaning that tax willbe deducted at source - its London-based Eurobond market couldbe destroyed, leading to the loss of several thousand jobs inLondon.
A compromise does appear to have been solidifiedon withholding tax. An agreement reached does compel Europeancountries eventually cooperating with tax authorities throughoutthe EU sharing information on savings, with the aim of combatingtax evasion. This would apply to the Cayman Islands as an extensionto the UK as an Overseas Territory.
The team which went to the UK consistedof the Hon. McKeeva Bush, the Leader of Government Business, theHon. Linford Pierson, Financial Secretary, the Hon. George McCarthy,the Speaker of the Legislative Assembly, the Hon. Julaianna O'ConnorConnolly, and the Attorney General, the Hon. David Ballyntyne.They are all expected back in Cayman in time for the swearingin of the new Governor, Mr. Bruce Dinwiddy.