Cayman Media Warns On EU Savings Tax Directive

by Amanda Banks, Tax-News.com, London

11 July 2002

Following the recent discussions between the Cayman Islands and the United Kingdom over the European Union Savings Tax Directive, the Cayman media has come out in opposition to any concessions, arguing that if the government agrees to exchange information with EU member states, the jurisdiction's economy and reputation could be irreparably damaged.

The Cayman Net News service reported this week that although no final decision was reached during negotiations between the UK's Paymaster General, Dawn Primarolo, and the Caymanian delegation - led by Leader of Government Business, the Honorable McKeeva Bush - the lines of communication between the two governments will remain open on the issue.

'Cayman's two lead industries, tourism and financial services, are international and it is therefore extremely important to stay in touch and informed on as many levels as possible, so that appropriate decisions can be taken by the government,' Mr Bush explained.

However, the newspaper warned, agreeing to participate in the European Union's information exchange drive could have grave consequences in terms of the taxation of Cayman residents, the jurisdiction's banking secrecy regime, and the economy of the Islands.

'Cayman residents will pay taxes to Great Britain for savings earned in the Cayman Islands,' the news service cautioned, adding that: 'This so called Savings Tax Directive could drive hundreds of millions of dollars from the Cayman economy.'

The report urged the government of the Cayman Islands to respond to European proposals with a resounding 'no', concluding that:

'This tax cartel would have a terrible effect on the Cayman economy...If the EU wins, the Cayman economy will lose savings and investment because the British government will get the power to tax income earned in the Caymans...At a minimum, the EU tax initiative would drive millions of dollars out of the country. That translates into fewer jobs and lower incomes for residents of the Cayman Islands.'

Recommended