Caymans dispute could harm co-operation

A ruling by a Cayman Islands judge may stop the Australian Tax Office investigating assets secretly held in the tax haven, experts say.
By · 28 Oct 2013
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28 Oct 2013
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A ruling by a Cayman Islands judge may stop the Australian Tax Office investigating assets secretly held in the tax haven, experts say.

Two Cayman Islands companies allegedly associated with Sydney businessman Vanda Gould, who was charged with tax and money laundering offences this month, obtained the ruling in September.

Justice Charles Quin of the Cayman Islands Grand Court found the Cayman Islands Tax Information Authority acted unlawfully by giving the ATO documents about the companies, MH Investments and JA Investments.

Despite the judgment, a few days later Australian judge Nye Perram admitted the documents into evidence in a Federal Court civil proceeding over a $40 million tax bill.

The documents, which appear to show Mr Gould controlled the two companies, were obtained under a tax information exchange agreement (TIEA) between the Cayman Islands and Australia, signed in 2010 as part of a global push to restrict the activities of tax havens.

Tax lawyer Tony Anamourlis, who is completing a doctorate on the TIEA system, said the Cayman ruling would make it "very difficult" for the ATO to extract information from the tax haven "unless they follow strict protocol".

"It's questionable now whether TIEAs are a workable tool to tackle tax evasion, fraud or criminality," he said.

He said the ruling gave the Caymanian courts a role in approving requests under the agreement. "I think the ATO is going to have to go back and have another look at the TIEA with the Cayman Islands."

Professor Miranda Stewart, of the Melbourne Law School, said the ATO already had the information when the Cayman court made its ruling. "That Cayman Islands court decision may well have an effect for cases where the ATO does not already have the information," she said.

She said the ruling would affect requests for information relating to periods before July 2010, when the treaty came into effect.

Professor Stewart said the Organisation for Economic Co-operation and Development was reviewing tax havens to see whether their domestic laws were getting in the way of information exchange.

"What it illustrates is that merely having the treaty - while it's an important first step in having the power to access tax information - is not enough," she said.

The Cayman Islands Tax Information Authority can appeal to the Court of Appeal, and from there to the Privy Council in London.
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