Financial Services Minister Hon Wayne Panton says he expects local industry officials to have “significant concerns” about UK proposed penalties aimed at penalising professionals who actively assist tax dodgers.
This as he believes the penalties being proposed by the Theresa May-led administration appear extreme, especially in the context of professionals who are merely fulfilling their professional obligations.
“An extra territorial scope and a threat to advisers anywhere with a significant financial penalty simply for advising on part of a proposal which they may view as a legitimate structure, but which is ruled otherwise, seems way over the top,” Minister Panton said in response to queries from The Cayman Reporter on Friday (19 August).
Last week Financial Secretary to the UK Treasury Jane Ellison released the 32-page document inviting public comment on the proposed penalties which includes fines of up to 100 per cent of the tax the scheme’s user underpaid. The consultation period closes on 12 October.
Minister Panton, speaking on the proposal, admitted that he was not fully apprised of the details of the document, but indicated he was aware of what was being proposed.
He hastened to add that he believed the local “industry will have significant concerns in relation to it, which are quite understandable.”
The Financial Services Minister assured that government and his ministry “will certainly be considering this (proposal) further.”
The Cayman Reporter reached out to the Cayman Islands Society of Professional Accountants (CISPA) for comment on the proposed changes.
However CISPA representative Sheree Ebanks declined to comment.
Last week the HM Treasury statement, announcing the release of the document, stated that “currently tax avoiders face significant financial costs when HMRC defeats them in court. However, those who advised on, or facilitated, the avoidance bear little risk.”
The statement said the UK government is acting to make sure that tax avoidance is rooted out at source and this action will target all those in the supply chain of tax avoidance arrangements.
Ms Ellison, in the statement, made it clear no one will escape penalty.
Premier Hon Alden McLaughlin, together with Minister Panton, has been leading the charge to defend Cayman’s international reputation and provide equality in the global discussion on corruption, money laundering and tax evasion.
Earlier this year both Premier McLaughlin and Mr Panton attended the UK Anti-Corruption Summit in London where they defended this country’s record, making it clear Cayman is a well regulated and transparent jurisdiction.
In fact, Premier McLaughlin, in what was considered a mic drop heard around the world, pointed to the disparity and the double standards being used on the global stage with Cayman and British Virgin Islands being pounded on transparency while larger nations carry on uninhibited.
“It is time to put behind us the shades of hypocrisy, which are part and parcel, and have been part and parcel of the global discussion of this issue for years and years. Those countries with real political clout on the world stage continue to focus only on jurisdictions that are only smaller in size, while ignoring obvious jurisdictions that ought to be part of the conversation, the result will be continued failure,” Mr McLaughlin declared at the summit.
The consultation document, released last Wednesday (17 August), clarifies the rules around whether proven tax avoiders have taken reasonable care to ensure their tax returns do not contain inaccuracies, making it simpler to enforce penalties when avoidance schemes are defeated.
“This is the latest of a number of government measures designed to tackle illicit finance and tax dodging. These include a new criminal offence for corporations that fail to prevent the facilitation of tax evasion, and new sanctions against those who engage in multiple avoidance schemes which are defeated by HMRC,” the release said.
According to the consultation document in the 2016 Budget, the government announced it would be exploring further options to influence the behaviour of promoters and other intermediaries (agents, Independent Financial Advisers and others in the supply chain) who enable or facilitate the sale and use of tax avoidance.
“It also announced that it will consider the case for clarifying what constitutes failure to take reasonable care in relation to the application of the penalty legislation to avoidance cases which are later defeated,” the document stated.
Ms Ellison, in the foreword of the consultation document, said a small minority of people in the UK seek to exploit tax laws in a way parliament never intended and secure for themselves or their clients an unfair financial advantage.
“These tax avoiders undermine the public finances, and place a disproportionate demand on government resource, which must be deployed to investigate, litigate and legislate to challenge and change their behavior,” she said.