International tax pressures continue to mount as Europeans blacklist the Cayman Islands and 3 others as tax havens. The finance ministers of the European Union (EU) have identified The Cayman Islands (a British overseas territory) as well as the Seychelles, Palau and Panama. According to the EU these jurisdictions have failed to implement the tax reforms necessary to come into compliance with EU standards.
The European Union sanctions those countries it has identified as tax havens based upon various tax avoidance schemes. The total list of EU tax havens to date now includes:
- American Samoa,
- The Cayman Islands
- The Seychelles
- Trinidad & Tobago
- US Virgin Islands
The fact the Europeans blacklist the Cayman Islands and 3 others as tax havens in the wake of Brexit is no coincidence. EU lawmaker Markus Ferber has said “The U.K. would be well advised to take note that EU Finance Ministers put a British Overseas Territory on the blacklist of tax havens … the idea of turning the U.K. into a tax haven will not be acceptable to the EU.”
The IRS has already taken a harsh stance against “Abusive Offshore Tax Avoidance Schemes.” The agency lists many different types of entities and schemes it believes are being used in Abusive Offshore Tax Schemes to avoid US taxation, including but not limited to:
- Foreign Trusts
- Foreign Corporations
- Foreign Offshore Partnerships, LLCs and LLPs
- Offshore Private Annuities
The IRS continues to be concerned that US taxpayers may utilize devices such as these to conceal transfers of money or other property to a foreign entity in an effort to hide income and avoid taxation. The IRS recently reasserted “Citizens and residents of the United States are taxed on their worldwide income … U.S. taxpayers are not to be allowed to evade taxes by shifting their own liability to some foreign entity.
The IRS is aggressively investigating all activities, entities and transactions involving what it considers to be tax havens and tax avoidance schemes. As the Europeans blacklist the Cayman Islands and 3 others as tax havens the IRS continues to aggressively monitor and audit offshore and international investments and holdings.