Cayman Islands added onto new tax haven blacklist
06 Feb 2019

The Cayman Islands has been added onto the Netherlands new low-tax jurisdictions list, dubbed blacklist, of 21 jurisdictions considered to be tax havens, as Amsterdam looks to roll out new measures to combat tax avoidance.

Companies registered in the jurisdictions on the list face paying 20.5% tax from 2021 on interest and royalties received from the Netherlands. This will prevent funds being channelled to tax havens through the Netherlands, the Dutch finance ministry explained.

The Netherlands list is longer than the EU blacklist which has only five states – American Samoa, the US Virgin Islands, Guam, Samoa, and Trinidad and Tobago.

In addition to these five, the Dutch list has: the Bahamas, Bahrain, Belize, Bermuda, the British Virgin Islands, Guernsey, the Isle of Man, Jersey, the Cayman Islands, Kuwait, Qatar, Saudi Arabia, the Turks and Caicos Islands, Vanuatu and the United Arab Emirates. These jurisdictions either have no corporation tax or have a corporation tax rate that is lower than 9%.

“The Dutch list will be updated each year, while the EU list will be updated in the first quarter of 2019. If, in the future, jurisdictions are added to the EU list that are not on the Dutch list, the measures will also apply to these jurisdictions,” the finance ministry said in a statement.

In response to the Dutch listing, Cayman premier Premier Alden McLaughlin (pictured) issued a statement saying: “The Cayman Islands Government regrets the unjustified “blacklisting” and rejects it as wholly lacking in fairness and credibility.

“It is unfortunate that The Netherlands has chosen to attempt to divert criticism of its own tax practices by attacking the legitimate tax regimes of other jurisdictions.”

Elsewhere, McLaughlin said: “While businesses domiciled in the Cayman Islands do not pay direct taxes to our jurisdiction, our laws and regulations ensure that the taxes owed to those home jurisdictions are paid.”

Cayman, like the British Virgin Islands and other offshore jurisdictions, is widely considered to be a tax and financial crime haven. It has tried to shed this image, partly by insisting that it has signed up to a number of international regulatory agreements or standards.

However, financial crime scandals and other issues linked to the jurisdiction have damaged its reputation.

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3 Responses to “Cayman Islands added onto new tax haven blacklist”
Dennis Smith

Dennis Smith February 8, 2019

“widely considered to be a tax and financial crime haven.” It would be better if the author of this article knew what he/she is talking about. Cayman is the last place on earth that a criminal would choose to set up a financial crime entity. Of the 214,000 offshore companies set up by Mossack Fonseca, none was incorporated in the Cayman Islands and only 104 had any link to Cayman. I suggest you check your facts before slandering a reputation.

Editor KYC360

Editor KYC360 February 15, 2019

In reply to Dennis Smith

Hi Denis, Thanks for your comment. I believe the issue here is ‘what is the Cayman Islands known for?’ i.e. what is its reputation. There are a number of definitions of tax havens, a more recent one coming from the EU Parliament Research Service, which states that: “The terms tax haven, offshore financial centre, and secrecy jurisdiction describe jurisdictions that feature distinctive characteristics such as low or zero taxation, fictitious residences (with no bearing on reality) and tax secrecy.”

The Cayman Islands, with a population of around 64,000 people and 107,000 active firms, has no direct taxation. This, with factors such as its stance on corporate secrecy (i.e. firm reluctance to publish a public register of beneficial ownership of firms), has seen it branded as a ‘tax haven’ and ‘secretive’ jurisdiction.

Over the years, the Cayman Islands has been linked to some financial crime stories/scandals .i.e. money laundering issues surrounding FBME (whose holding company was based in the Cayman), tax evasion trouble involving Julius Baer’s Cayman Islands unit, corrupt payments in the FIFA scandal, where dirty money was also understood to have been paid through a Cayman Islands-based bank, as well as Cayman National Securities and Cayman National Trust’s multi-million dollar tax crimes case; in recent days it has emerged that suspect criminal crash was paid from a Cayman Islands-based firm into the account of the son of the former Moldovan PM, and so on.

Hence, like many jurisdictions considered to be tax havens, the Cayman has acquired a reputation in financial crime analysis circles of being a place where both legitimate firms as well as criminals can secretly stash cash. In addition, others have highlighted its system’s vulnerability to financial crime. Transparency International analysis (2017), for example, points that the majority of banks operating in the Cayman don’t have a physical presence in the country and its Financial Crimes unit has just 18 people to investigate $1.3 trillion in assets, amongst other issues. The Cayman Islands government believes it is not a place to ‘hide wealth’, insisting that it abides by global regulatory standards, as pointed out in the KYC360 article, but financial crime commentators/analysts and others believe otherwise, hence the line in the story says the jurisdiction is “widely considered to be a tax and financial crime haven.” – KYC30

James Michaels

James Michaels February 8, 2019

The Netherlands is correct to identify tax and money laundering havens in this manner. I work in Seychelles which is a worse jurisdiction than Caymans for money laundering. Why has the Netherlands and the EU not included Seychelles on its list? It is an international scandal.

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