The Cayman Islands is set to be blacklisted by the European Union (EU) for failing to comply with good governance standards on tax, according to reports from the Guardian.
The decision regarding the British overseas territory comes just two weeks on from the UK’s official departure from the EU, and may be seen indicative of its loss of influence in Union rulings.
Once finance ministers approve the verdict, the Cayman Islands will join the ranks of ‘non-cooperative’ territories, including Fiji, Oman, Samoa, Trinidad and Tobago, Vanuatu and the three US territories of American Samoa, Guam, and the US Virgin Islands.
Blacklisted jurisdictions could potentially incur a set of countermeasures from EU member states, including increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions.
The EU agreed to begin compiling a list of non-cooperative jurisdictions in December 2017 to tackle risks of tax abuse and unfair competition.
The Cayman Islands and British Virgin Islands were placed on the EU’s ‘grey list’ back in 2018 due to concerns that they facilitated offshore structures that attracted profits without real economic activity.
Historically, the UK has protected its overseas territories from EU tax scrutiny, and was named the biggest global enabler of tax avoidance last year by the Tax Justice network.
As a re/insurance industry hub, the blacklisting of the Cayman Islands could be a concern for companies with operations in the territory, although it is unclear whether any concrete sanctions will be imposed by the EU.
Bermuda – also a British territory and industry hub – found its way onto the EU tax blacklist last year, but was later removed after taking steps to comply with the requirements of the listing process.