If anyone had any doubts about the storm brewing for Cayman, the reports following the recent meeting of 17 OECD member countries (the rich club that does not want anyone else to become rich) led by France and Germany will make the position clear. Offshore financial centres are in the spotlight again and a renewed attack is under way.
Various extreme and aggressive statements have been made by certain political leaders about prying open and/or shutting down tax havens, punishing those who deal with them and the like. That may be the standard rhetoric we have come to expect from the US and European (including the UK) politicians trying to deflect criticism from the mess they have created in global financial markets and in their own domestic economies. And a significant number of important global financial players, such as the US, Luxembourg, Austria and Switzerland opted not to attend the meeting.
But more directly concerning developments are to be found deeper in some of the reports. Naming and shaming is to restart. We are in for a new blacklist (bad guys) and possibly a green (not a white) list (good guys) from the OECD probably in 2009. This list will resurrect the names (and maybe include some new ones) of those countries that are deemed not to fully cooperate on tax evasion and transparency. The French suggest that about a dozen countries will be on this list.
There are very obvious clues as to the names that may be on the role of (dis)honour. The Secretary General of the OECD reportedly said “Aruba, Bermuda, Isle of Man, Guernsey and Netherlands Antilles are making progress in negotiating exchange of information agreements”. So far so good. These places may expect to be treated as good guys on the green list. The French Minister, Eric Woerth, then presented the other side of the coin and reportedly said “The Bahamas, the Cayman Islands, St Kitts and Nevis, as well as some Pacific islands such as Samoa, aren’t meeting their pledge to fight tax evasion.” So these places can expect to be treated as bad guys on the blacklist. This would be an extremely disadvantageous outcome.
So what has Cayman done or not done to be singled out? In 1998, when the OECD first prepared its list of (non cooperative) tax havens, the Cayman Islands narrowly avoided being listed because it gave an advance commitment to cooperate by eliminating what were perceived to be unfair (competitive) tax practices, by enhancing transparency and by entering into exchange of information agreements on tax matters. Since then, Cayman has entered into the first tax information exchange agreement (TIEA) with the USA and implemented the EU Savings Directive (including execution of bilateral agreements with all EU members). Good faith negotiations (at least on Cayman’s part) were also started with other jurisdictions (including the UK) with a view to agreeing TIEA’s or similar arrangements (hopefully with some benefits flowing to Cayman as well as to the other party). It is these negotiations that appear to have stalled, not because of any particular deliberate fault or unwillingness on the part of Cayman. Indeed, it might be concluded that the other parties have now decided that continued vilification of Cayman and other offshore financial centres plays better in the media than recognizing their efforts and welcoming them into the fold!
Nevertheless, it is vital that Cayman renew its engagement efforts. It is necessary as a matter of urgency to move to Plan B as Plan A clearly has not worked. Plan B should include (1) increased local transparency by amending the Companies Law and similar laws governing Cayman entities to make more information public and readily available both locally and internationally, (2) areduction in Cayman’s demands that it receive significant and quantifiable (but to-date unobtainable) benefits under tax information exchange agreements and (3) the execution of a meaningful number of TIEA’s. This should demonstrate and secure international recognition of Cayman’s effective implementation of its commitment to transparency and avoid Cayman again being blacklisted. The Government and the private sector A Teams must give this the highest priority.
Obama’s plan for Cayman
It would seem that Barack Obama also has plans for the Cayman Islands..
From Obama’s speech in Indianapololis, Oct. 23rd, 2008.
"By the way, did you know that there’s a building in the Cayman Islands that supposedly houses 18,000 corporations. That’s either the biggest building or the biggest tax scam on record. And I think we know which one it is.
That’s the system my opponent defends. That’s the system he wants to preserve. Well, Indiana, we’ve tried it John McCain’s way. We’ve tried it George Bush’s way. And we’re here today to say enough is enough. We can’t afford four more years of their “fundamental economics.” That’s why I’m running for President of the United States of America."
Full transcript here http://www.demconwatchblog.com/2008/10/barack-obamas-speech-in-indianapolis-in_23.html#jumpto
I have always said, Ignorance is no longer Bliss, it’s just Ignorance.. watch out Cayman, watch out!!
More articles on this subject, please Mr. Ridley!
This is very informative although also troubling for those of us not directly involved in the workings of the offshore financial industry. Given the parallel rumblings in the US and with every probability the Democrats with get elected, it seems clear that we have good reason to feel nervous. It would seem to warrant a significant international information campaign by our country in an effort to ensure the ongoing stability of this industry most vital to Cayman’s well-being. Why do I get the feeling that our government may not be doing everything possible in this regard? In the short term we may not need all the infrastructure we are building if the economy has to depend on tourism alone.
Thank you, Mr. Ridley for keeping us up to date with what is happening financially and giving us a global perspective. Please keep it up!