As published on caymancompass.com, Wednesday 1 December, 2021.
Financial Services Minister André Ebanks has described any threat posed by global corporate tax reform attempts and the imminent establishment of a global minimum corporate tax rate of 15% as “manageable” for the Cayman Islands.
Although the measures are aimed at zero-tax and low-tax jurisdictions, including Cayman, Ebanks said they will not pose a significant problem.
Addressing delegates at the virtually held Cayman Captive Forum in a video message on Tuesday, he said Cayman sees itself as “a partner in these initiatives”, because of “our longstanding principles of taxes should be paid where they are owed”.
The minister said the tax reform proposals focus on the activities of multinationals, to which Cayman has minimal exposure.
Cayman also does not have any double-taxation treaties, which are the subject of many tax issues addressed by the so-called Pillar 1 and Pillar 2 plans, negotiated under the umbrella of the Organisation for Economic Co-operation and Development.
In addition, investment funds, the “bread and butter” of Cayman’s financial services, were equally unaffected by a minimum global corporate tax rate, because their tax neutrality was recognised, Ebanks noted.
“Lastly, but importantly, there’s no requirement on the Pillar 1 or Pillar 2, for a jurisdiction to change its tax regime,” he said. “So in other words, there is no requirement for the Cayman Islands to alter its indirect consumption-based tax model.”
The minister told insurance industry delegates that Cayman was “moving steadily” towards being taken off the Financial Action Task Force anti-money laundering grey list.
In March 2019, the Caribbean Financial Action Task Force released a mutual evaluation report that found the Cayman Islands had major shortcomings in its ability to analyse and understand the risks from money laundering and terrorism financing.
The CFATF made a total 63 recommendations in its report and gave Cayman one year to implement the measures to enhance the effectiveness of its laws and practices to combat money laundering.
In February 2021, with Cayman having addressed 60 of the 63 recommendations, the FATF nevertheless placed the jurisdiction on its list of countries whose AML practices are under increased monitoring.
Cayman is already largely or fully compliant with all of the 40 FATF recommendations to address money laundering and terrorist financing.
Only four G20 countries and three fellow international financial centres have a similar level of compliance.
Crucially, Cayman was grey-listed due to shortcomings in the practical application of the 40 technical criteria in three of the eleven ‘outcome’ categories.
Under these, Cayman should impose stricter sanctions and fines, including for those who do not file accurate and up-to-date beneficial ownership information, as well as bring more prosecutions and convictions for all types of money laundering.
Cayman’s three-point plan to deal with these had already led to one area being marked as addressed, the minister said.
Should Cayman in the future be blacklisted by the EU as a result of the FATF greylisting, government would engage with EU officials in much the same way it did after Cayman’s EU tax blacklisting, which was reversed a few months later, Ebanks said.