CAYMAN ISLANDS: Jurisdiction needs office in EU to fight blacklist proposal, according to government.

As published on caymancompass.com, Tuesday 2 February, 2021.

The Cayman Islands government is pushing ahead with plans to establish representative offices in Brussels, Hong Kong and Washington, DC, before the end of the year.

Speaking at the Chamber of Commerce annual general meeting last week, Premier Alden McLaughlin said a representative office in Brussels is part of the necessary engagement with the European Union.

The premier said recent calls by the EU Parliament for the expansion of the EU tax blacklist to automatically include Cayman, showed the need for “continued diplomatic, technical and academic battle with them over this issue”.

The EU Parliament passed a resolution demanding an expansion of the blacklist and the automatic inclusion of jurisdictions, like the Cayman Islands, that have no corporation tax or other income taxes.

“There is no legislation we can pass to fix that. There’s no regulation we can bring, except we impose direct taxation,” McLaughlin said.

He said Cabinet had decided a few weeks ago to establish Cayman Islands government offices in Brussels, Hong Kong and Washington, DC, before the end of 2021.

He said the May 2021 election notwithstanding, it is the view of the government that Cayman “needs a permanent, effective presence in Brussels that can help advise the government about what we need to do on that particular front”, particularly now that the UK is no longer a member of the EU.

McLaughlin said while the resolution was “worrying”, because it gives “a sense of how the elected members of the European Parliament are thinking”, it was not a binding decision and akin to a private member’s motion in Cayman’s Parliament.

Under EU law the European Parliament is a co-legislator, but it is the EU Commission that typically proposes new legislation.

EU parliamentarians can take the initiative, such as in this case, by requesting the commission submit a legislative proposal by a specified deadline.

The EU Commission can refuse the request but has to explain why.

McLaughlin said it is not the first time the proposition has been made and it was clear that “the hawks in Europe are absolutely gung-ho to do away with any country that does not have a certain minimum level of direct taxation”.

He said it would also “be interesting to see what the Biden administrations thinks and says about places like the Cayman Islands”.

“In times past the Democrats weren’t terribly friendly to jurisdictions like ours, but after the last administration that the US has had, I think most people are breathing a sigh of relief at least at the early utterances and posture of the Biden administration,” he added.

The idea of trade and representative offices in the three locations was first raised two years ago in combination with the creation of the Ministry of International Trade, Investment, Maritime and Aviation Affairs.

The management of trade offices is one of the remits of the ministry. Government had allocated an initial $3 million in its annual budget to staff the new ministry, establish a Hong Kong office and to use for promotional activities.

Chief Officer Eric Bush travelled to Hong Kong in 2019 to look for a suitable location for a trade office with the aim to promote investment opportunities in Cayman and support financial services and tourism.

However, the 2019 Hong Kong protests and then COVID-19 put the opening on hold.

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