Matthew 7:3

Considering comments from the Vatican, we need to send a message of our own to the Holy See. The Cayman Islands are a religious society with Christian values, including a strong Catholic congregation.

We should therefore be concerned when the Pontiff of Rome, the leader of the Catholic Church, joins the bandwagon and attacks offshore centres such as these Islands and blames them for all sorts of wrongs, including the current international financial crisis and the flight of development capital tied to tax evasion.

Pope Benedict commands huge respect but one wonders where his advisors are getting their economic and financial advice, possibly from the German Finance Minister or the French President, since it is so misguided and wide of the mark.

On the first point, there is clear and incontestable evidence where the current crisis started, but it bears repeating that its origins were in the bad lending practices and financial engineering of regulated entities in major onshore economies, not in offshore centres.

On the second point, His Holiness should also look much closer to home. The Vatican has a very patchy history of transparency, fiscal accountability and rectitude. It also has no problem with its own tax free status. It cut a deal with Mussolini in 1929 that effectively made the Holy See a tax haven itself. The current EU Yellow Pages states “Residents of the Vatican City pay no taxes”.  The Catholic Church in Italy has a plethora of tax breaks and, as recently as 2005, the Berlusconi government exempted the Church from all taxes on most of its real estate in Italy. The Catholic Church will also qualify for charitable non-taxable status in most countries round the world.

Those inclined to be cynical will conclude that the authors of the Pontiff’s policy paper have been liaising with the authors of the various reports produced by Oxfam, Christian Aid and others over the years. It should be noted that these worthwhile organizations are themselves typically charitable, non taxable and also enjoy donations that are frequently tax deductible for the donees. They are also happy (as they should be) to receive donations from hedge funds and others legitimately domiciled or doing business offshore. They have further overlooked that some hedge funds are mandated by their constitutional documents to devote a portion of their profits to charities or are set up specifically to invest in sustainable projects in poor countries.

No one in Cayman (or anywhere else) will argue over the need to help alleviate poverty in third world countries (Cayman church groups regularly provide relief and assistance in Cuba, Haiti and Central America) and to help fight corruption that deprives those countries of their much needed funds (Cayman has assisted in tracing ill gotten gains and has also recently strengthened its regime by enacting the Anti-Corruption Law).

So, to charge that small economies that are able to operate without direct taxation and have thriving financial services industries are ipso facto responsible and punishable for the evils of tax evasion and official corruption beggars belief.

Those charities, politicians, bureaucrats and now it appears, the Catholic Church, that clamour for the summary conviction and elimination of these small countries (who have few international votes and limited bargaining strength) should think long and hard about the implications if they get what they wish for. Small Islands like Bermuda, the Bahamas, the British Virgin Islands and the Cayman Islands will be impoverished and consigned back to the poverty of times gone by.

The despots of the world will continue to find ways to pillage their countries’ treasuries and to have the proceeds available in one form or another in onshore financial centres in Europe and elsewhere (convenient after all for Harrods and Bergdorf Goodman). Will Oxfam, Christian Aid and the Vatican then send care packages to both Zimbabwe and the Cayman Islands?

So those who believe that “tax free” is synonymous with “guilty as charged” would do well to read Matthew 7:3.