Britain reiterates threat to force tax compliance on Cayman Islands

Britain's Paymaster General,
Ms Dawn Primarolo

Friday, November 21, 2003

GEORGE TOWN, Cayman Islands: In a letter dated 31 October, the United Kingdom reiterated its position that the Cayman Islands must comply with the European Union's Directive on Taxation of Savings, or face direct legislation to force compliance.

The letter from UK Paymaster General, Ms Dawn Primarolo, was addressed to the Leader of Government Business in the Cayman Islands, Mr McKeeva Bush.

Though stating that it was in no one's interests for the UK to use its reserved powers to legislate directly for the Cayman Islands, Ms Primarolo suggested that they would do as the Chancellor of the Exchequer, Mr Gordon Brown, has promised to the EU. "If we consider that we are left with no choice but to legislate, then we will do so," she wrote.

The European Union's Directive on Taxation of Savings would subject citizens of EU member states to taxes on interest earnings in accounts in other member states.

The UK has given the Cayman Islands two ways to comply with the measure, by either an automatic exchange of information of information from the outset of enactment, or by a transitional withholding tax moving to an automatic information exchange. "I must stress that there is no third way," wrote Ms Primarolo.

According to Ms Primarolo's letter, the EU agreement states that the Directive will only be implemented if the relevant territories apply either the automatic exchange of information or a withholding tax on the same terms as the Member States.

Ms Primarolo suggests in her letter that there are "several other issues of importance that are unresolved" between the UK and the Cayman Islands, and she specifically mentions the Government's wish to have the Cayman Islands Stock Exchange formally recognised for tax purposes by the UK authorities. "I hope that it will soon become possible for our respective governments also to resume dialogue on these matters."

Mr Bush said that the Cayman Islands Government "will not support anything that will destroy our financial services industry." He also warned the UK of its responsibilities for contingent liabilities for any direct Cayman Islands' loss of revenue resulting from their policy proposals.

  Back...

  Most popular articles: viewed, printed and e-mailed

  Printable version