Spain agrees not to classify Cayman as a “tax haven”

Spanish officials said, on 17 January 2011, that Spain will no longer classify the Cayman Islands as a tax haven under its domestic legislation once the tax information exchange agreement (TIEA) that it has negotiated with Spain has been signed.

“The conclusion of negotiations with Spain and the anticipated reclassification of the Cayman Islands under Spanish tax law represent significant progress in the Cayman Islands international tax transparency programme,” said Cayman Islands Premier and Minister of Finance McKeeva Bush. “Spain is also an EU member state and a G-20 country and therefore, Cayman’s agreement fulfils the objectives of our negotiation strategy, which is focused on concluding TIEAs with nations in these two groups.”

The Cayman Islands currently has signed 20 bilateral arrangements for the provision of tax information. In addition to Spain, the Cayman Islands currently has seven agreements awaiting signature – Italy, Japan, India, Greece, Indonesia, South Africa, South Korea – and is in further negotiations with other countries.

Spain’s efforts to clamp down on fiscal fraud yielded a record 10 billion euros last year. The unexpected yield was 23% higher than in 2009 and equaled about 1% of Spain’s annual gross domestic product, according to preliminary figures released in January by the government. The Spanish tax agency had anticipated that tax fraud receipts would remain flat.

Juan Manuel López Carbajo, head of the Spanish tax agency, said that 2010 “wasn’t a miracle year but the result of several years of better strategic planning and better use of technology and information sharing.” He cited the creation in 2006 of a special department to monitor whether large taxpayers were trying to keep money offshore, in particular companies with over 100 million euros in annual revenues that operate across borders.

Another area of progress has been in Spain’s huge real estate sector, which has been at the heart of the country’s economic difficulties. López Carbajo said his agency had shifted its focus onto land transactions to identify possible fraud at an earlier stage in the construction process.

Spain is also benefiting from international efforts to force Switzerland and other banking centres to relax secrecy laws, as well as tapping into account information sold by bank employees. It recouped about 300 million euros from a list of undeclared HSBC accounts initially handed over to France by one of the bank’s former information technology specialists.