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Caymans-Australia Dispute Could Harm Tax Co-operation

by Mike Godfrey,, New York

31 October 2013

A recent court ruling on an ongoing tax dispute between the Cayman Islands and Australia could have far-reaching consequences for Tax Information Sharing Agreements (TIEAs).

In September Justice Charles Quin of the Cayman Islands Grand Court ruled that it was illegal for the Cayman Islands Tax Information Authority to hand over documents about two companies registered in the islands to the Australian Tax Office (ATO). The companies, MH Investments and JA Investments, are linked to Australian businessman Vanda Gould, who was charged with tax and money-laundering offences earlier this month.

The documents, allegedly establishing a connection between Gould and the two companies, were shared with the ATO under a TIEA inked between the Caymans and Australia in 2010. The TIEA only applies to tax periods beginning on July 01, 2010, but the case against the two Cayman Islands companies relates to the years from 2000 to 2007.

In spite of a request by Charles Quin that the documents obtained by the ATO be returned or destroyed, Australian judge Nye Perram allowed them to be used as evidence in the USD40m Federal Court case.

Tax lawyer Tony Anamourlis reportedly said that the Cayman Islands ruling would make it "very difficult" for the ATO to extract information from the islands. "It's questionable now whether TIEAs are a workable tool to tackle tax evasion, fraud or criminality," he said.

Professor Miranda Stewart, of the Melbourne Law School, said the Organization for Economic Co-operation and Development (OECD) was reviewing whether the domestic laws of TIEA signatories were impeding information exchange. "What it illustrates is that merely having the treaty, while it's an important first step in having the power to access tax information, is not enough," she said.

TAGS: court | money-laundering | tax | business | tax information exchange agreement (TIEA) | law | Australia | Cayman Islands | Investment | Invest | Investment | Tax

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