US And Caymans Sign Tax Information Exchange Agreement

by Mike Godfrey, Tax-News.com, Washington

28 November 2001

US Treasury Secretary Paul H O'Neill hosted the United States-Cayman Islands tax information exchange agreement signing ceremony yesterday (Tuesday). In attendance were United Kingdom Ambassador Sir Christopher Meyer to the United States and Cayman Island Governor Peter J Smith CBE to sign the pact.

The tax agreement specifies that the Cayman Islands will share with the Bush administration tax information to help the US government trace financial criminals. Former IRS Commissioner Donald Alexander has told the US media that the treaty will enable the IRS to overcome the secrecy surrounding the accounts of financial institutions in the Cayman Islands to allow it to launch audits for tax evasion and money-laundering.

'Right now,' said Mr Alexander, 'nothing is a fair description of the cooperation the United States is getting. It's a hotbed of tax evasion. This is a good step in the right direction.'

Earlier this year during a hearing of the Senate Governmental Affairs Investigations Subcommittee Paul O'Neill declared that the US would focus on gaining co-operation from the tax haven jurisdictions for information sharing. He pledged that the US would agree treaties within a year to share tax information with at least half of the 35 countries identified as tax havens by the Organisation for Economic Co-operation and Development.

It is estimated that the United States government loses around $70 billion in tax revenue every year as people hide their assets in offshore tax havens and about $800 billion is currently on deposit in 600 banks licensed in the Cayman Islands which is double the amount deposited in every bank in New York City combined.

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