Cayman-US couple fight tax exchange decision

| 09/09/2015 | 8 Comments

CNS Business(CNS Business): US taxpayers and Caymanian status holders Lee and Sheila Aronfeld are seeking a judicial review of a decision by the Cayman Islands Tax Information Authority (CITIA) to give their information to the IRS in the United States in connection with a criminal tax probe. Shareholders in three Cayman registered exempted companies, the Aronfelds claim the request infringes their rights to privacy and they have not been given a fair chance to challenge the request for their private documents.

Shareholders in Tropical Trader Co II Ltd, Sir Turtle Building Co Ltd and We Five Ltd, the couple said these companies have only ever carried on business in the Cayman Islands and have no connection with the United States. However, the Aronfelds are subject to a criminal tax investigation in the USA.

Cayman Islands Financial Services Minister Wayne Panton signed an updated agreement with the US for tax sharing in November 2013 under FATCA, which was incorporated into the local tax exchange legislation. But in documents filed in the Grand Court last month the Aronfelds have challenged how the local tax authority released documentation to the IRS as part of a US tax investigation into their affairs under this law.

The couple argue that the requirement to produce information “was impossibly wide and amounts to fishing in that it seeks information which is not or could not reasonably be supposed to be foreseeably relevant”.

Requesting that the courts overturn the CITIA’s decision, the couple described the move as “oppressive” and an “unreasonable and disproportionate invasion of the rights of the Applicants”. They claim the disclosure contravenes the bill of rights and that the tax authority gave them no notice of the existence or substance of the request as required by law.

“The decision of CITIA to comply with the Request was fatally flawed in that it disabled itself from considering information and representations from the Applicants,” the couple state in the application for a JR.

Represented by attorneys Travers Thorp Alberga, the Aronfelds are asking the court to quash the decision by the CITIA and give back all their documents, as the attorneys say the request is essentially unlawful.

The legal challenge is not the first time that the courts have been asked to examine a decision by the CITIA to release tax related information under the treaties the CIG has signed with other jurisdictions.

Both the Grand Court and the Court of Appeal have already ruled that the Tax Information Authority did not follow its legal obligations before releasing information to the Australian authorities in a 2013 case where information was requested for two Cayman companies, MH Investments and JA Investments, as part of another criminal probe.

In that case both Cayman courts found the CITIA had no authority to consent to the use of the documents in foreign proceedings without applying to the Grand Court. Coupled with the failure to notify the parties involved and that the CITIA had infringed their rights to privacy and failed to give them a fair hearing, it was ordered to get the information back. Although the Australian courts refused the request for the return of the information and also refused not to use the documents, in the end the related criminal tax case was dropped.

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Category: Finance, Financial Crime

Comments (8)

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  1. Anonymous says:

    Curious – Section 163 Companies Law – the objects of the [exempt] company are to be carried on mainly outside the [Cayman] Islands

  2. Anonymous says:

    Travers Thorp Alberta on this case, as well. The U.S. Department of Justice’s much beloved Cayman Islands law firm. I hope the public & media is paying attention to this case.

    Chanting: USA, USA, USA, USA,…?

  3. Tax Free Caymanian says:

    What rock have these people been living under? Americans around the world are being taxed no matter where they live. Also, because they own the companies, they owe the US government taxes on the companies earnings.

    My gripe is how they managed to name a company “Sir Turtle Building Co. Limited”. Isn’t Sir Turtle trademarked by the Department of Tourism and Cayman Airways? People are always taking advantage of our good nature and exploiting our resources for personal gain.This needs to STOP! Maybe that’s why Wayne Panton is pushing for an Intellectual Property Law.

    • Anonymous says:

      What happened to Tropical Trader Co I Ltd.? Was it liquidated or did it get rolled-up into a new company?

      Also, I don’t see any mention of ‘Island Companies Inc.’- a parent company that hosted a number of (popular) subsidiaries touting high-end products e.g. jewelry, watches, sunglasses, tropical attire, etc.

      Just curious.

  4. Ex-expat says:

    This is now one of three judicial investigations of FATCA, the US extra-territorial law which has forced an over-ride of the democratically-achieved laws in multiple “foreign” countries in order to solve their angry aim to locate “tax cheats” around the world. The court case in Canada took place in early August; a ruling as to whether to stop (via injunction) the transfer of FATCA-related information on over 1 million residents of Canada is is anticipated by September 15. In the US, the Federal Court in Ohio will rule by the end of September on a requested injunction of FATCA and FBAR transfer of information. These US “intergovernmental fishing expeditions” are likely unconstitutional in the US and definitely an intrusive extortionist-pressured over-ride of sovereign laws in multiple sovereign countries.
    These countries definitely should fight back and, as a group, demand withdrawl from this economic and data-collection invasion, no less abhorrent than Germany’s invasion of nearby countries in WWII or Islamic State’s current brutal regime.

    • Anonymous says:

      You’re delusional. Either cooperate or be prohibited from sending or receiving money to and from the US. Simple.

    • Anonymous says:

      If they we’re averse to paying U.S. taxes on their Worldwide Income, then they should have relinquished their citizenship. The family must have known that after decades of investing in the Cayman Islands that they were running a huge risk of possible IRS/U.S. Prosecution if (any portion of) their offshore assets were uncovered. The family went as far as to apply for Caymanian Status, but never once thought it might be time to sever allegiance with the U.S. (as they steadily realized financial growth/wealth in another country)

      I hope they have read the recent news brief, by Deputy AG Sally Yates, at the NYU School of Law, and subsequently published by Bloomberg News, stating that White Collar Crime is the pivotal focus of the U.S. DOJ “…Come to the U.S., Get Arrested.”

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