Cayman Finance has challenged the conclusions of a new report by the Tax Justice Network (TJN) which claims that Cayman is responsible for the largest share of tax losses suffered by countries around the world.
According to the UK-based TJN, a global watchdog which challenges the tax status of offshore financial centres, “the five jurisdictions most responsible for countries’ tax losses are British Territory Cayman (responsible for 16.5% of global tax losses, equal to over $70bn), the UK (10%; over $42bn), the Netherlands (8.5%; over $36bn), Luxembourg (6.5%; over $27bn) and the US (5.53%; over $23bn).”
But Cayman Finance, the association representing the financial services industry of the Cayman Islands, has slammed the TJN report for what it described as their “distorted interpretations of the Cayman Islands’ statistics.”
In a statement questioning the rationale of TJN’s findings, Cayman Finance said its conclusions “get more inaccurate, further from the facts and less believable as they continue to be undermined by the credible findings of recognised international bodies like the OECD and the EU.”
The EU recently removed the Cayman Islands from a ‘blacklist’ of countries it said were “non-cooperative jurisdictions for tax purposes” citing improvements made to the jurisdiction’s tax policy frameworks.
As noted by Cayman Finance, “just last month the EU completed an exhaustive, multi-year review of the Cayman Islands tax neutral regime and found it to be transparent, consistent with good tax governance principles and without the existence of harmful tax regimes.”
It goes on to say that “despite enormous pressure from critics to blacklist the Cayman Islands, the EU – to its credit – drew conclusions based on the facts, which is something the Tax Justice Network has not done.”
Cayman Finance further argues that “the Cayman Islands tax neutral regime supports a level of transparency that arguably makes it better at combatting tax evasion, aggressive tax avoidance and base shifting than those jurisdictions that rely on often opaque systems of Double Taxation Treaties.
“The Cayman Islands financial services industry thrives as a transparent, internationally cooperative jurisdiction that continues to support global economic growth and recovery benefitting countries and millions of people around the world," it said.
The report by Tax Justice Network came as it was reported that the British government has handed out billions of funds in COVID-19 support payments to companies, some of which it claims are registered in offshore financial service centres, referred to as tax havens.
According to TJN, US$427 billion “is stolen annually by companies and individuals who avoid paying taxes and called for the G20 to tighten rules.”
Alex Cobham, TJN's chief executive said: “A global tax system that loses over $US427bn a year is not a broken system, it’s a system programmed to fail. Our governments have programmed the global tax system to prioritise the desires of the wealthiest corporations and individuals over the needs of everybody else.”
He said, “The pandemic has exposed the grave cost of turning tax policy into a tool for indulging tax abusers instead of for protecting people’s wellbeing.
“Now more than ever we must reprogramme our global tax system to prioritise people’s health and livelihoods over the desires of those bent on not paying tax.”
Meanwhile, the UK thinktank, TaxWatch UK, said its analysis has found that almost £4.8 billion was given to companies which it claimed had links to “tax havens”.
It mentioned the luxury fashion brand Chanel which it claimed has its ultimate parent company is based in the Cayman Islands – as having received £600 million, and the budget airline EasyJet – which according to TaxWatch UK is part-owned by a trust also said to be based in Cayman.
George Turner, director of TaxWatch UK, said: “Unlike many other countries in the world the UK has decided not to put any conditions on the tax conduct of companies receiving government support.
“There are clearly ways in which governments can structure conditions in a smart way to ensure better tax compliance. One idea for example, would be to force companies receiving support to publish more info," he stated.
The Tax Justice Network report listed the UK as second on its list of countries where it claims their financial system deprives other countries of tax revenue.
It said that UK financial centre, largely based in London, is responsible for 10% or the equivalent of over $US42bn in tax revenues lost by other countries.