Cayman Government Issues Promises Over Tax Information Exchange Agreements

by Amanda Banks, Tax-News.com, London

04 April 2002

The Leader of Government Business in the Cayman Islands, Hon. McKeeva Bush recently promised that the Caymanian authorities would consult with the finance and private sector before entering into any new tax information exchange agreements.

Speaking at a meeting held with financial sector leaders to explain the details of the Cayman-US tax information exchange agreement (TIEA), McKeeva Bush said:

'I assure everyone that the Government will not enter into any future negotiations on matters on this evening's agenda or on related issues without prior consultation with representatives of organisations attending these meetings.'

Also speaking at the meeting, which was the second in a series designed to maintain open dialogue with the private sector, was Joseph Tompkins, a former US Department of Justice attorney.

He attempted to reassure delegates regarding the potential effects of the TIEA, and explained that the agreement between the United States and the Cayman Islands has several significant features. Firstly, according to Mr Tompkins, the agreement will not come into effect until 2004, and it will not be retroactive. The treaty information exchange terms only apply to federal income taxes, and the tax liability in question must be 'a significant or substantial amount'.

The former Department of Justice attorney also explained that the tax evasion activity under investigation must be a 'systematic effort or pattern of activity' before the provisions of the information exchange agreement can be invoked, and revealed that any information gained by the US tax authorities cannot be passed to a third party, or used for purposes other than those specifically stated.

It is thought that the same restrictions will apply in civil tax enquiries, to which the treaty will not apply until 2006.

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