The Cayman Islands have agreed to make it more difficult for the rich to evade taxes
By Thom Hartmann, The Thom Hartmann Program
You need to know this. The bankers, billionaires, and wealthy elite are losing one of their favorite offshore tax havens.
The Cayman Islands have finally agreed to cooperate with the U.S., and make it more difficult for the wealthy to stash money overseas. Officials in that nation have agreed to accept provisions of the Foreign Account Tax Compliance Act, which will take effect in July of next year. After that, the Caymans will have to alert our Treasury Department about Americans’ who have more than $50,000 dollars stashed in tax-free accounts in that nation.
The FATCA was enacted in 2010, after a Swiss banking scandal revealed that wealthy Americans were hiding substantial fortunes overseas. According to Reuters, banks and financial institutions that refuse to comply with the new law will be hit with a 30 percent withholding tax, which would essentially freeze them out of U.S. financial markets.
The deal between the U.S. and the Caymans also puts pressure on several other low-tax nations, like Luxembourg, Bermuda, and the British Virgin Islands, to sign on to similar plans meant to fight U.S. tax evasion.
As it becomes more difficult to hide money offshore, rich people will actually have to pay their taxes, and there will be incentive for the wealthy to invest here at home.
The days of the rich skipping out on their patriotic duty of paying taxes could soon be over, and the wealthy may have to start contributing to the care of our commons, which made their vast fortunes possible in the first place.
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Cayman Islands, US conclude talks on pacts aimed at uncovering Americans’
By Associated Press From Washington Post
KINGSTON, Jamaica — The Cayman Islands says it has concluded negotiations with the U.S. on pacts to report information on accounts of American citizens.
The U.K. Caribbean territory is considered the world’s sixth largest financial center and a major haven for mutual funds and private equity.
It says texts of the agreements will be made public once a signing ceremony is held. But island authorities s
ay they will “pave the way for automatic exchange of information” under a sweeping U.S. law called the Foreign Account Tax Compliance Act.
Washington is demanding client data under the act, which is expected to take effect next year. It targets non-compliance by U.S. taxpayers with foreign accounts.
Cayman Financial Services Minister Wayne Panton said Tuesday that the pacts show the territory’s commitment to “transparency initiatives.”
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CIG announces negotiations with USA have concluded
ALTER STORY
Hon Wayne Panton, Minister for Financial Services, says the Cayman Islands is making progress on its tax exchange agreements with the US
The Cayman Islands Government (CIG) on Tuesday, 13 August announced that it has concluded negotiations with the United States on a Model 1 intergovernmental agreement (IGA), and a new tax information exchange agreement (TIEA).
The agreements pave the way for automatic exchange of information (AEOI) under the US Foreign Account Tax Compliance Act (FATCA).
Both governments have initiated the agreements, to indicate their intent to sign them; they also have noted that the official signing will be held as soon as possible, after which the texts will be publicly available.
The benefits of the Model 1 IGA for foreign financial institutions in the Cayman Islands is that it will streamline, through the CIG, the reporting of information regarding accounts and non-financial entities substantially owned by United States citizens and residents. The CIG will then relay the information to the US Internal Revenue Service.
Industry also will benefit from CIG managing the implementation of a standardised framework for the reporting of data, as the FATCA model is likely to be adopted as a broader template for multilateral AEOI in the future. Having a standard mechanism for reporting to Cayman’s Tax Information Authority, which is the sole channel in the Cayman Islands for the provision of tax-related information to other governments, is likely to reduce the administrative costs that would result from foreign financial institutions (FFIs) having to collect and transmit data to other governments on their own.
Cayman’s Minister for Financial Services, Hon Wayne Panton, said that the Cayman Islands government is pleased to have arrived at this milestone, which recognises that the global community is moving in the direction of one AEOI standard for tax purposes.
‘As an international financial centre (IFC) that contributes to the efficient functioning of global markets, the initialling and subsequent signing of the IGA and new TIEA with the United States will again demonstrate Cayman’s commitment to engage in globally accepted tax and transparency initiatives,” he said.
Mr Panton thanked the CIG officials who were involved in the discussions, as well as members of Cayman’s financial services industry who provided assistance and input into the decision to adopt a Model 1 IGA.
US Treasury Deputy Assistant Secretary (International Tax Affairs) Robert Stack said the Model 1 IGA and new TIEA will effectively combat tax evasion and improve compliance through increased transparency, mutual cooperation, and the automatic exchange of information.
Gonzalo Jalles, CEO of Cayman Finance, has welcomed government’s efforts in consulting with the financial services sector regarding FACTA
Withholding does not commence until after 30 June 2014. FATCA compliant procedures must be in place by 1 July 2014. Preexisting accounts are those in existence as at 30 June 2014 and the due diligence requirements are moved back six months.
According to PriceWaterhouse Coopers, by the beginning of the year, US treasury had signed IGAs with Mexico, Spain, Switzerland, Ireland and Denmark. The first IGA was signed with Britain last year September.
Cayman Finance, the group that represents the country’s financial services industry, applauded government for its efforts in bringing the dialogue to this stage.
“This has clarified the way forward, in order for industry to progress with the implementation,” said Cayman Finance CEO Gonzalo Jalles. “We are particularly thankful to government for including Cayman Finance and the broader industry in the consultation process, and commend them for ensuring that we remain a well regulated and transparent IFC.”
Following the signing with the United States, the CIG will have further discussions with the UK’s HM Treasury in order to finalise the terms of the UK Model 1 IGA FATCA agreement.
See also iNews Cayman story published August 14th 2013 “Cayman concludes negotiations with USA on IGA1 and a new TIEA” at: http://www.ieyenews.com/2013/08/cayman-concludes-negotiations-with-usa-on-iga1-and-a-new-tiea/
