WASHINGTON — The Cayman Islands is no longer a tax evasion haven, now that it has made an agreement with the U.S. to implement stronger anti-tax evasion laws.
Reuters reports that this could pressure other low-tax and no-tax countries to follow the lead of Cayman Islands.
The islands will implement the Foreign Account Tax Compliance Act (FATCA), which was enacted in 2010, and will take effect in July 2014. This law requires that foreign banks and financial institutions to tell the U.S. Internal Revenue Service (IRS) about Americans’ offshore accounts that are over $50,000. This came after a scandal rocked the Swiss banks, where it showed American taxpayers hid significant amounts of income from the government.
If the islands did not comply, the U.S. threatened them with a 30% withholding tax on their U.S. source income, which essentially freezes them out of U.S. financial markets.