Cayman Islands yield to European Union

Tuesday, February 17, 2004

GEORGE TOWN, Cayman Islands: The Cayman Islands will fall in line with the European Union's Saving Tax Directive (EUSD) effective 1 January 2005 following a vote in the Legislative Assembly last Friday.

The opposition People's Progressive Movement (PPM) abstained from the vote that allows the EU to impose taxes on income earned from savings of EU citizens with accounts in Cayman.

The leader of Government Business, Mr McKeeva Bush advised members of the Legislative Assembly to accept the motion, in a move that is in stark contrast to his earlier position on the matter. 

"We could go on our own, but we have no mandate to do so," said Mr Bush speaking about the alternatives to accepting the EUSD. "I am not one that is normally pushed around. I believe that you can only push so much. In effect then, our two alternatives are that we either reject the proposal and allow the UK government to put it in to place, or we agree, take what is offered and say, 'I live to fight another day.'"

The about-face move by the United Democratic Party (UDP) Government comes after Mr Bush received a letter from the UK Paymaster General, Dawn Primarolo on 12 February. 

In her letter, Ms Pimarolo indicates that she has received written notification from Mr Bush on 4 February that he would recommend the adoption of the EUSD to the Legislative Assembly, and that a subsequent e-mail from Financial Secretary George McCarthy on 6 February indicated that Cayman would do this at the "earliest opportunity."

Previous to the written communications indicating Cayman would implement the EUSD, Mr Bush had apparently agreed to do so last December during talks in London, according to Ms Primarolo. 

"The draft framework of undertakings that we agreed in December, and which our officials subsequently fleshed out in a series of meetings in Grand Cayman and London in January, envisaged that the Government of the Cayman Islands Legislative Assembly before 31 January, 2004 that appropriate legislation be enacted to apply the same measures as EU Member States; affirm that the legislation would be enacted by 30 June 2004; and enter into negations with EU Member States with a view to conducting bilateral agreements implementing the domestic legislation by 30 June 2004."

However, Mr Bush might have backtracked on those undertakings in Ms Primarolo's view. "I was therefore disappointed to learn from your letter of 30 January that your Government would not be recommending legislation to the Legislative Assembly by 31 January," she wrote, "Indeed, your letter did not refer to making a recommendation at all. Instead you referred to 'on-going' discussion and 'continuing fleshing out with the UK.'"

Later in her letter to Mr Bush, Ms Primarolo said that the Cayman Islands Government has until the 20 February to make every effort to ensure the legislation is enacted by the 30 June, or face direct legislation by the UK government. With Cayman's agreement, the UK will move to expedite the Cayman Islands Stock Exchange's application for recognition and the date would be agreed for discussions on a bilateral double taxation agreement.

In 2001, then Leader of Government Business, Mr Kurt Tibbetts, joined forces with other Caribbean territories and sent a letter to the UK government expressing his party's concerns and the need for a level playing field. 

Mr Tibbetts said: "Government expects us to take a position even though they have treated us and the country like mushrooms." He added: "The opposition will, in the national interest, do whatever we can to make the most of what is, truly, a very bad situation."

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