Cayman Islands has been delisted from the EU’s list of non-cooperative jurisdictions for tax
purposes – informally known as its ‘tax haven blacklist’. The decision to remove one of the world’s
most secretive and low tax jurisdictions has come under fire by critics who see the criteria for listing
is flawed, arbitrary, and perhaps even politically motivated.
According to European Council’s press release, the Cayman Islands was delisted “after it adopted
new reforms to its framework on Collective Investment Funds in September 2020.” It was one of two
jurisdictions, along with Oman, to be removed from the EU list, which was first established in
December 2017, and is updated twice a year.
European Union finance ministers added Anguilla and Barbados to the EU’s blacklist of tax havens
and removed Cayman Islands and Oman after they passed the necessary reforms. The EU list, set up
in 2017 after revelations of widespread tax evasion and avoidance schemes, now includes 12
jurisdictions: American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles,
Trinidad and Tobago, the U.S. Virgin Islands and Vanuatu. Those on the blacklist face reputational
damages, higher scrutiny in their financial transactions and risk losing EU funds.
In the Communication on tax good governance published in July 2020, the European Commission
committed to review the definition of harmful tax regimes (Code of Conduct for Business Taxation)
and the listing criteria (based on that definition) during 2021.
The Cayman Islands has a zero corporate tax rate and the IMF says it is one of 10 economies that
host more than 85 percent of all phantom investments, together with Luxembourg, the Netherlands,
Hong Kong SAR, the British Virgin Islands, Bermuda, Singapore, Switzerland, Ireland, and Mauritius.
None of those countries is blacklisted.
The OECD (2020) classifies the Cayman Islands as an investment hub – a jurisdiction where the total
inward Foreign Direct Investment are above 150% of GDP. Multinational enterprises report on
average a relatively high share of profits (25%) in investment hubs compared to their share of
employees (4%) and tangible assets (11%).
Cayman’s Premier, Alden McLaughlin, welcomed the decision, saying that his government remains
committed to good governance standards on this issue, and that he “will continue collaborating with the EU, including through broadening our dialogue to topics of mutual interest.
Date: 14 Oct 2020
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