Less than a month after the United Kingdom exited the European Union (EU), it’s reported that the Cayman Islands will be placed on the EU’s list of uncooperative countries in tax matters, when the European Council meets next week.
The Financial Times on Wednesday reported that the 27 EU ambassadors decided to place the British Overseas territory on a list of nine territories that do not effectively cooperate with the European bloc.
The European finance ministers are set to confirm the decision at a meeting next Tuesday.
In order to avoid inclusion on the tax blacklist, the Cayman Islands government last year agreed to address EU concerns over the economic substance of collective investment vehicles before the end of 2019.
However, the Financial Times, in its report quoted unnamed officials as saying that the Cayman Islands “did not pass legislation that adequately addressed concerns about companies who claim tax advantages but do not have a sufficient economic presence on the island”.
The government of the Cayman Islands, in a statement on Wednesday, said it had not received official confirmation of a blacklisting.
“We believe that we have introduced the appropriate legislative changes to enhance our regulatory framework, in line with the EU’s requests,” the statement said.
“Over the past two years, the Cayman Islands Government has adopted a number of fundamental legislative changes to enhance tax transparency and cooperation with the EU, fully delivering on our commitment to strengthen our regulatory regime and addressing the concerns reflected in the EU Council conclusions of March 12, 2019. The Cayman Islands Government has offered to make itself available for further dialogue or clarification with the Commission and the EU Ministers of Finance,” the statement said.
British Virgin Islands and Bermuda also targeted
The EU is targeting Cayman and two other British Overseas Territories – Bermuda and the British Virgin Islands – as well as the Bahamas for enabling structures that attract profits without having corresponding economic activity locally.
In response, all four territories introduced domestic legislation that requires certain companies, which want to take advantage of the zero- or low-tax regimes in these jurisdictions, to demonstrate they have a sufficient level of management, staff, offices or expenditures in the territories.