Cayman Finance dismisses secrecy ranking

| 05/10/2011

(CNS): The chair of Cayman Finance and the organisation’s representative in London have both dismissed the findings of the Financial Secrecy Index, published in the UK capital on Tuesday by the Tax Justice Network and Christian Aid. Richard Coles and Jack Irvine both claim that the authors of the report are advocates of global taxation (once referred to by former Cayman Finance Chair Anthony Travers as the "Tax Taliban") who are not taken seriously. Within some 36 hours of the publication of the report, which found that Cayman was the second most secret financial jurisdiction in the world and played a key part in the global financial crisis, it was posted on the websites of more than 70 different international media organisations.

"It beggars belief that the Tax Justice Network still produces these canards about the Cayman Islands,” Richard Coles said in the wake of the report’s publication. “We have never been more transparent and we have never had so many tax treaties with other jurisdictions. What is deeply worrying is that some sections of the UK media take Messrs Murphy and Christensen seriously. These men are high taxation zealots and like the OECD they see nothing immoral in governments taking half or more of a man's salary,” Coles said, adding that they would not be happy until there was a universal global tax rate.

The CF chair said they had failed to notice that the harmonisation of the European Union was what he called a “fiscal disaster” and he believed the “individuality of Cayman in taxation matters should be applauded not vilified."

His comments were echoed by Jack Irvine, the London based advisor to Cayman Finance, who liaises on their behalf with HM Government, the media and Cayman’s London office. Irvine described the secrecy index report as the “same tired old song” that the Tax Justice Network have been turning out for years.

"There are a few facts that your readers should appreciate about this rather grand sounding organization,” Irvine told CNS. “In fact it is a tiny little outfit run out of Richard’s Murphy’s modest house in the English countryside.  Nobody in the financial world takes Mr Murphy seriously. He is an advocate of punitive taxation and he would like all countries to have a common tax system. This is not a man who appreciates individuality when it comes to governments.”

The TJN is actually an alliance of a number of individuals and a non-aligned coalition of researchers and activists with a common interest in what they believe are the harmful impacts of tax avoidance, tax competition and tax havens. Murphy is just one of the individuals who blogs regularly on the subject.

The secrecy index, which ranked Cayman as the world’s second most secret jurisdiction, was written and researched by seven people, including John Christensen, who is the director of the Tax Justice Network International Secretariat and the former economic adviser to the States of Jersey. Nicholas Shaxson, the author of Treasure Islands: Tax havens and the men who stole the world, was also one of the seven members of the team, along with Richard Murphy, who is a chartered accountant and director of Tax Research LLP.

Irvine said that Murphy has the support of what he described as “politically motivated charities” such as Christian Aid and Oxfam, which others would describe as one of the largest and most respected charitable organizations in the world. But he said it was Murphy that was forever “claiming that tax neutral administrations such as Cayman, BVI or Jersey are responsible for the deaths of children in the developing world, in particular Africa.”

The London based rep for Cayman Finance said he believed that the families in lesser developed nations were deprived of aid as a result of corrupt dictators.

He said there would always be sections of the British media who would “dance to Mr Murphy’s tune”, and that it was “no surprise that the left wing Guardian is always willing to repeat Mr Murphy’s tirades without question or attempting any balance.”

Irvine didn’t comment on the stories run by the Daily Telegraph, known as a more politically right wing daily newspaper, or those in other more neutral news houses, such as Reuters and Bloomberg.

Within 36 hours of the publication of the report, some 70 different news and business websites had posted the findings of the TJN’s research and in particular the special report about Cayman and what the TJN said was its role in the financial crisis.

Despite this, Irvine said, “The Cayman Islands should be comforted by the fact that the UK government takes no notice whatsoever of either the Tax Justice Network nor The Guardian’s regurgitation of their fantasies and indeed the current UK regime and the House of Commons All Party Parliamentary Group have repeatedly signalled their support of Cayman and its robust financial and legal systems.”

The Telegraph reported that a treasury spokesman has said the UK government was committed to tackling all forms of tax avoidance with an emphasis on tackling avoidance at the root. The UK government would be keeping up the momentum as he admitted more needed to be done.

See the index here

Category: Finance

Comments (29)

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  1. Anonymous says:

    I thought Cayman Finance had got rid of Irvine and his outfit? On this performance they really should – quickly.

  2. Anonymous says:

     

    One of the causes of the world financial crisis can be blamed on the Cayman Islands

    .

  3. Polly Picked A Pickled Pepper says:

    Why was Coles moaning on about personal taxation rates?  Isn't his point meant to be this has nothing to do with personal taxation rates?  Or is he admitting the Cayman operates to reduce tax burdens of onshore resident individuals?  To be frank his response was so unnecessarily verbose, personal and hysterical it could have formed part of an Ezzard Miller speech.

  4. tim ridley says:

    There will always be those at the extremes who will believe anything TJN, Christian Aid and OxFam etc put out. Equally, there will be those at the extremes who deny that Cayman and other OFC's have any faults and are transparent to boot. Reality is somewhere in between.

    Gradually, as collection and publication of statistical data of cross border capital flows improves (and Cayman has a vital part to play in collecting the data), we should have much firmer figures to work with. This data should then provide a better indication of the extent to which these flows include the product of criminal  (tax evasion, money laundering, corruption etc) activity. My instinct is that the percentage of these flows that is criminal is quite small in the overall scheme of global capital movements (and that it probably is extremely difficult to stop this criminal abuse entirely). This will greatly disappoint the shouting classes in politics and in the media overseas.

    It will take time to gather the numbers. In the meantime, Cayman should make some short term and relatively easy changes to its Laws in order at least to deflect the continuing barrage of attacks. I have in mind obvious changes to allow the public inspection of company and limited partnership constitutional documents, filings and statutory registers and an holistic Data Privacy Law (in place of the venerable and much loved/hated CRPL).

    The Luddite mindset of some in the public and private sectors also needs to change.  A policy of defensively slamming the door in the face of those who request information and documents is not necessarily the best way to proceed. This only produces the predictable nasty media reaction. Tiresome as it may be, taking the time to explain what can or cannot be disclosed and why, often produces a fairer and more balanced response.

    • Chris Johnson says:

      Whilst you have all those directors with numerous appointments including one such individual with over 500 appointments there will be stiff opposition to any change in the law that permits the public to have access to information to which they are entitled. One word sums it up. Greed. Cayman needs to become a real financial centre and not model itself on Nevis and St. Vincent. The old days have gone and certain professionals need move into this century.

      • Anonymous says:

        Genuine question if I may and hopefully not too lengthy a reply, but I don't think I'm the only one scratching my head about this.

        What is it about having access to the principals of a company, available to everyone, on request, that is seen as a good thing?  Or probably easier why is it a bad thing to not have access?

        Surely most of this information is mundane and only becomes of interest when something goes wrong, at which point, I'm assuming the relevant authorities have access to the info.

        I realise that there will be individuals with large directorship portfolios but if that's your line of work is it not just the same as having a lot of registered companies ala Ugland House?

         

        • Anonymous says:

          Not at all the same. Providing a registered office is a relatively simple administrative function which can be performed by having adequate staff.  When you are the director of a company you owe certain duties to the shareholders of that company. While certain functions may be delegated you cannot delegate your duty of oversight. If you are the director of too many companies then you cannot possibly give them all the care and attention that they require. That is relevant for investors to know up front.   

          • Anonymous says:

            OK that sort of makes sense but surely then you just enact legislation on the maximum number of directorships an individual can sign up for. 

             

            I don't really see how knowing an individual has responsibiliy for 50 directorships for very small low level operations that they can oversee comfortably is worse than overseeing 5 very active and complicated companies, and how a public register would be able to provide this distinction.

             

            I guess where I am going is if we did have an open register is it nothing more than an appeasement rather than a genuine improvement in transparency.

        • Firefly says:

          So how do you know someone is a principal without independent confirmation? Have you ever negotiated with anyone in your career? You need waken up. Just what do directors have to hide? the point is that one does not want to know the answer when things go wrong. we need know before.

          • Anonymous says:

            And this is what puts us in a negative light in the eyes of the TJN? Sorry not being purposefully beligereant,  I can see some relevance to it, just not as way to go from bad to good in the eyes of the TJN.

        • tim ridley says:

          I do think that, if you wish the benefit of limited liability and the other benefits available under a statutory regime, such as the Companies Law or the Limited Partnership Laws, you should also be prepared to have open to inspection the constitutional documents and other statutory documents and filings. If you are prepared to accept personal and unlimited liability, then the disclosure rules are indeed different.

    • Pat my X says:

      There is however a couple of problems with making registers and other documents public:

      a) this will only bring about more people using nominees and corporate directors to disguise the true ownership and management, (but more fees for the lawyers and trust companies would arise as a result no doubt), and

      b) in particular with non-resident companies. where the registers were formerly private, do not the principals or directors have a right to expect this to continue? If you make the registers public, that would include all appointments, shareholdings etc since incorporation, i.e. prior to the change in the law allowing public acess. Not only unfair on the principals but would surely knock a hole in Cayman's reputation for discretion and professionalism. 

       

      • tim ridley says:

        With respect to the two excellent points:

        1. This is indeed always a possibility and is already common practice in many onshore and offshore jurisdictions. But the use of nominee shareholders and corporate directors is not necessarily to "disguise" true ownership or control. Frequently, it is a matter of administrative efficiency. Either way, I still see no reason why the information should not be open to inspection.

        2. Legitimate rights to privacy should of course be respected. But laws do change over time. After all, 30 years ago, there was very little cross border exchange of confidential information. The position is very different now under the MLAT,TIEA's etc.

  5. Anonymous says:

    The only thing that is certain is that no one in government understands the significance of leaving these reports unchallenged.

  6. Anonymous says:

    Cayman has lots of secrets that the world should know and act on. Secrets that most islanders turn a blind eye to.

  7. SPV INDEED says:

    Time for Cayman to focus on expanding tourism before the expat lawyers, fund managers and accountants pack their disc drives, exit their rented offices and flee to their overseas homes where they can hang their framed Cayman PR certificates.  

  8. Anonymous says:

    This report by TJN is posted globally and read globally by millions.  No one over there gives two hoots about what Coles or Cayman Finance has to say, because they know you have a vested interest in keeping things the way they are, because its your bread and butter, isn't it?   You cannot dispute the fact that there is much secrecy in business here, e.g. board of directors, memo and articles of association, etc.   Go ahead and dismiss the report in your usual cavalier fashion, but it won't change the minds of the millions of readers worldwide who believe that tax-havens such as Cayman are the root of the problem and keeping other countries from developing as tax-havens encourage rich individuals and corporations not to pay taxes in their own countries for the benefit of their own people or domestic social programs, but rather to avoid taxation and get richer quicker by putting money into trusts and offshore companies in overseas tax-havens and hide the wealth they are making from their own governments.  No matter how you try to whitewashit, those are the cold hard facts.  WHy do you think Dart came here in the first place, because he loves Cayman?  Give me a break. 

  9. Anonymous says:

    If Cayman wants to get any traction on putting its case forward it will need to produce something detailed and substantial that sets out facts. That is the only thing that the world will pay attention to. Pronouncements by Mr. Coles or McKeeva Bush are not worth the paper that they are not written on.

  10. Loopy Lou says:

    This response from Mr. Coles is awful.  Responses should be informative and measured.  The language used is entirely inappropriate and will make us sound ridiculous.

    Mr. Coles is trying to by be Mr. Travers.  Mr. Travers went too far in his responses but had far more nous.

  11. Anonymous says:

    The response from government to these rubbish reports is pathetic. It is completely inadequate for the only response to be Cayman Finance's "dismissal" of them.  A dismissal by Cayman Finance only gets the reports more line inchs as nobody outside of the membership of Cayman Finance cares what its views are. Despite the fact that these reports are rubbish they become an uncontradicted part of the material that gets trotted out as authoritative by every organisation looking at the subject. Because nothing substantial exists to show what rubbish there reports are, the reports are accepted as gospel and the opponents of Cayman win every time.

  12. Chris Johnson says:

    Quote We have never been more transparent from Richard Coles is a bunch of rubbish. The very fundamentals of transparency are missing and still Cayman Finance Ltd a body which is by all means not supported by the entire community in the Cayman Islands rabbits on when knowingly they are aware of the deficiencies in our laws. These gaping holes need to be fixed and bring Cayman into this century. Secrecy is alive and well and does nothing to protect innocent creditors and investors. Instead of making ineffective press comments Cayman Finance Ltd needs to sit down and fix the transparency problems before the UK Government does it for us. The board of directors are in the firing line and need get off their backsides if Cayman Finance Ltd is to gain respect.I am not advocating that TJN is correct in all they say but they are correct on several issues that require urgent attention.

    • Anonymous says:

      Yes Chris, TJN talks both rubbish and sense, it starts with the conclusion it wants to reach, that all offshore centres are evil, assembles some real facts and concocts a spurious argument to make the facts give the conclusion which of course then becomes "fact" simply by its utterance. Bit like a maths teacher I had who could prove that 1 plus 1 equalled 3, if you couldnt spot the false "fact" in the argument. BUT, there is at least one fact in TJN's argument that is correct. Cayman, was an integral part of the continuing global financial crisis, much of the concealment of banks horrendous debts was done through CLO's CDO's and other structured products. Developed elsewhere, but stacked up there in the Cayman Islands. OK, if they hadnt been set up here then they would have been somewhere else, but they were here. 

      • Anonymous says:

        Integral means it would have avoided if not for us or other similair countries.  Its a stretch of the imagination to believe this.

  13. Slowpoke says:

    I apologize in advance to my FS buddies (yes, I actually have some), but…

    It is time for Coles to decide if he wants to be a Cayman Finance puppet or if he wants to Chair the HRC.  FYI, there is in fact nothing “immoral” with taxing a Wall Street banker 50 %, when he/she needs to be bailed out by the public because of his/her incompetence, then wants his/her huge bonuses back a couple of years later (with tax cuts intact).

    Also, please stop the bleating about how the rich are “job creators”.  Corporate profits in the USA were up something like 80+%, the top 5% income earners became incredibly richer over the last few years… Number of jobs created?  0

    I just could not trust a HRC Chair who could be so cold, insular and dismissive.

  14. Artful Dodger says:

    I work in the industry.  I have read the TJN analysis and basis for the rankings.  It seems fair and accurate,  Cayman is a high secrecy jurisdiction and profits from it. 

    Who is the director of company X?  I can't tell you.

    What are the articles of this company? I can't tell you.

    Who owns this company? I can't tell you.

    There is one golden rule to test abusive high secrecy jurisdictions – do they have separate disclosure regimes for domestic businesses as for those that incorporate here for convenience and are not doing business here?  If the answer is "yes", then you know there is something wrong.  Why have different regimes for those two types of company?

    • Chris Johnson says:

      Thank you Artful Dodger for this. I have been saying much of the same thing for years. As Tim Ridley states ' Any document filed with the Registrar must be made a public record.' However I do see a need for two types of company although disclosure should be the same.

  15. Peters says:

    very true

  16. Anonymous says:

    Embarrassingly unconsidered rabid response from Cayman Finance. As usual. A decent PR firm would handle this differently and do a far better job