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Cayman Islands Fires Back at Netherlands Over Blacklisting

Posted on Jan. 14, 2019

The Netherlands’ decision to place the Cayman Islands on its tax haven blacklist has brought a backlash of criticism from the British overseas territory.

In a statement released January 4, the Cayman Islands government rejected the Netherlands’ assertion that the territory is a tax haven, noting that the Netherlands itself has a checkered history of tax avoidance practices. The Cayman government maintained that the territory was placed on the blacklist solely because it does not impose a corporate income tax.

“The Cayman Islands government regrets the unjustified ‘blacklisting’ and rejects it as wholly lacking in fairness and credibility,” the government statement says. “It is unfortunate that the Netherlands has chosen to attempt to divert criticism of its own tax practices by attacking the legitimate tax regimes of other jurisdictions.”

The statement emphasizes the Cayman Islands’ participation in the inclusive framework on the OECD’s base erosion and profit-shifting project, as well as other tax transparency initiatives like the EU Code of Conduct Group on business taxation. The government also reiterated its commitment to global standards and said it will continue to work with the global community to improve those standards’ effectiveness.

The Netherlands released its blacklist of 21 jurisdictions on December 28, identifying countries that it believes present a risk of tax avoidance. The list, which includes countries with no corporate income tax or a rate below 9 percent (lower than any EU member state), is separate from the EU’s low-tax jurisdiction blacklist that was released in December 2017, and it contains only five of the same countries as the EU list. The Dutch blacklist will be used in the application of several of the country’s antiavoidance measures, including controlled foreign corporation rules that took effect January 1.

The Cayman Islands’ listing on the Dutch blacklist is at odds with statements made by OECD officials during a recent visit to the Caymans. On January 3 and 4, Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration, and Melissa Dejong, head of the OECD’s Harmful Tax Practices Unit, met with representatives from the Cayman Islands government, including Cabinet members and local financial services and commerce regulators.

Saint-Amans praised the Caymans’ participation in the inclusive framework on BEPS, as well as its leadership at the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, according to the Cayman Islands Chamber of Commerce. Saint-Amans noted that the Cayman Islands’ reputation among partner countries is increasing because of its contributions in the realm of transparency, and that the country’s tax neutrality — or lack of a corporate income tax — should not be used to label it a tax haven, the Chamber of Commerce said.

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