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February 3, 2004
Caymans in move on EU tax crackdown
By Andrew Parker
The Cayman Islands, the leading Caribbean tax haven, has given a conditional commitment to comply with the European Union's crackdown on tax evasion. The Caymans, a UK dependent territory, are willing
to comply so long as they secure financial concessions from the British government.
Officials from the UK and the Caymans held intensive discussions in London and the Caymans last month, in an effort to end a
bitter dispute over the EU crackdown.
McKeeva Bush, the Caymans' de facto chief minister, said he was confident that if the talks reached a satisfactory conclusion his administration could introduce
legislation to comply with the EU savings tax directive.
The directive is likely to damage the Caymans' financial services industry, and Mr Bush has been seeking off-setting measures such as official
recognition of the islands' stock exchange. "Progress is being made and both parties are co-operating warmly," said Mr Bush. "If discussions proceed as we hope, we are satisfied that the offsetting
measures we will agree with (the UK) government will outweigh the costs of implementing the directive in the Cayman Islands."
The EU directive, which seeks to tax the savings income of EU citizens who
put funds outside their home countries, cannot take effect in 2005 without the participation of UK territories such as the Caymans. The Caymans have opposed the EU directive because they could lose some of their
banking and hedge fund business to rival centres such as Hong Kong and Singapore.
In December, the UK threatened to force the Caymans to comply with the directive. But Britain would have to pass legislation
to force the Caymans into line, and Mr Bush had previously threatened to mount a legal challenge. Such legal action would almost certainly drag into 2005, and hold up implementation of the EU directive.
A UK
official said: "We are having constructive ongoing discussions with the Cayman Islands on the directive."
Meanwhile, the Organisation for Economic Co-operation and Development today holds a meeting
in London to discuss its troubled crackdown on tax evasion. Offshore centres such as the Caymans are objecting to how four OECD member countries, led by Switzerland, are refusing to make commitments to exchange
certain banking information.
Tax authorities in most OECD countries want access to banking information so as to verify the liabilities of citizens who put funds outside their home states. More than 30
offshore centres have made commitments to exchange banking information on civil matters from 2006. But they may ditch their commitments if Switzerland, Austria, Belgium and Luxembourg maintain their stances.
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