Cayman Islands reported to have signed on to EU Tax Directive

Monday, February 9, 2004

LONDON, England: The UK's position on the EU tax directive about sharing information on savings has been bolstered by a conditional commitment last week from the Cayman Islands to comply with its terms, the Financial Times reported Sunday.

The Cayman Islands, a leading tax haven, had been the only UK dependent territory holding out against the directive because of fears its financial services industry would be damaged.

However, the UK territories have made it clear they want to ensure all rival offshore centres due to participate in the directive comply with it at the same time.

Meanwhile, the European Union remains locked in talks with four European tax havens, ahead of a June deadline to endorse the new legislation.

Frits Bolkestein, the EU's commissioner for the single market, is expected to tell EU finance ministers on Tuesday that insufficient progress has been made in recent negotiations with Liechtenstein, Andorra, San Marino and Monaco to reach a deal on sharing information and introducing withholding taxes. "It's a case of nobody wanting to make the first move," an EU official said.

The legislation, the EU savings tax directive, was agreed last year by EU ministers with the proviso it would only come into force in 2005 if other financial centres pledged to adopt the rules by the end of June 2004. Countries such as Luxembourg are concerned that EU financial centres could lose out if non-EU rivals ignore the legislation, which is designed to help the fight against tax evaders.

However, the EU official said Mr Bolkestein was optimistic that differences would be resolved ahead of the June deadline. Prince Nikolaus of Liechtenstein also told Reuters last week that "things have much advanced". 

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