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September 15, 2003 Brown's tax law threat to Cayman Islands By George Parker Gordon Brown has threatened to pass new laws to force the Cayman Islands, one of the world's largest offshore centres, to comply with European Union savings tax rules. The chancellor told fellow EU finance ministers in Stresa, Italy, that the British dependent territory had not told the Treasury how it intended to apply the new rules. Britain led the way in demanding new EU tax rules based on the exchange of information between tax authorities, as a way of increasing revenue and tackling avoidance and fraud. But it has been forced on to the back foot by the reluctance of some of its own territories to tighten up their financial regimes. The compliance issue was raised on Saturday by Hans Eichel, German finance minister, who asked for assurances that all the UK's territories had fallen into line. Mr Brown said that Guernsey, Jersey and the Isle of Man would apply a withholding tax regime, also retained in Austria, Belgium, and Luxembourg. Meanwhile, the British Virgin Islands, Turks and Caicos islands and Montserrat had also indicated they would comply with the new EU rules. But he admitted that the Cayman Islands, a Caribbean tax haven, had not come forward with proposals, and he would legislate if necessary. "It would probably be through a Treasury order - secondary legislation," said the Treasury. The EU's attempts to create a new savings tax regime have been tortuous but are now approaching fruition. The European Commission reported that reciprocal deals with Monaco, San Marino and Andorra were within reach. Switzerland has said it will co-operate after seeing what other non-EU financial centres have in mind. But Frits Bolkestein, EU internal market commissioner, warned that the tiny Alpine state of Liechtenstein remained unwilling to co-operate. "The Commission has asked the European Union to apply pressure on Liechtenstein," his spokesman said. The Cayman Islands, like Liechtenstein, have built their economies on financial services.
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