President Obama’s ‘notorious tax havens’

| 07/05/2009

On Monday May  4, 2009, US President Barack Obama took the first steps toward making good on his campaign promise to finance his initiatives and social programs “by closing corporate loopholes and tax havens that don’t help America grow”.

President Obama served notice to offshore jurisdictions worldwide, announcing his intentions to reshape the US Tax Code and, in the process, eliminate the loopholes that allow U.S. corporations to use offshore financial jurisdictions. President Obama highlighted the Cayman Islands as one of the “notorious tax havens” targeted as a financial jurisdiction they feel is assisting U.S. corporations and individuals to avoid potential tax exposure.

Similar sentiments were echoed by Prime Minister Gordon Brown on March 4, 2009 before the U.S. Congress, "How much safer would everybody’s savings be if the whole world finally came together to outlaw shadow banking systems and outlaw offshore tax havens?"

What’s at stake for the US and UK? The Obama administration states that closing these loopholes would generate approximately $200 billion in tax revenue over the next decade. In a report by the U.S Government Accountability Office “Eighty-six of the 100 largest publicly traded U.S. corporations had foreign subsidiaries and sixty-three of the 100 largest publicly traded U.S. federal contractors in terms of fiscal year 2007 contract obligations, reported having subsidiaries in jurisdictions listed as tax havens or financial privacy jurisdictions.” By some estimates reported in The Wall Street Journal “$700 billion or more in U.S. corporate earnings have accumulated in overseas accounts in recent years.” In the U.K. the BBC has reported that “According to one estimate tax havens cost the U.K. revenue at least £18.5billion every year – a loss which has to be made up by ordinary tax payers.”

It is therefore understandable that we find ourselves under attack from foreign governments seeking to recoup some of these losses.

Governments around the world have communicated their desires to shut down offshore jurisdictions for years, but none have been as persistent as the current administrations we now face. They have been backed into a corner and are now forced to find funding while facing a global economic crisis. However, with the current status of the world economy the consequences that would come with these tax initiatives are far more widespread and damaging than the administrations wants to admit.

The proposed changes to tax codes would leave multinational corporations at a great disadvantage, essentially leaving them unable to compete against companies operating in countries with less tax exposure. Such a scenario would ultimately lead to many of the companies the administrations are trying to protect, vulnerable to takeover by foreign competitors.

Some estimations state that approximately 50% of our GDP can be attributed to the financial services sector. However I believe that the loss of any portion of this industry would have a much more severe impact that 50%. We cannot pretend that this will quietly go away; instead we now have to be proactive and deal with the reality that these administrations want their money back.

At last month’s G20 meeting in London the so called "notorioustax havens" had little or no representation at the table during discussions that have the potential to significantly impact us. This is not just a problem for Cayman; these initiatives will impact many of our neighbours including the Bahamas, Bermuda, British Virgin Islands, and the Turks and Caicos.

I find it curious that the countries with so much to lose have not come together to refute the claims made against them. For example, at last months Summit of the Americas, the Cayman Islands was not represented. It is ironic that the countries we find pointing fingers at our financial industry today such as the US and UK fail to recognize the regulatory failures in their own systems; essentially trying to pass the buck on to countries with little voice on the world stage.

The global economic meltdown has just started to have visible effects on our Islands, and it is now time for us to reassess ourselves and start the reforms and re-inventions necessary to sustain ourselves through these uncertain times and beyond. This is just one of the many issues confronting us today.

The good news however, is that we still have the capable people and financial resources necessary to develop the policies and strategies necessary to reform and re-invent the product that will allow us to adapt to these difficult times. There is no international rescue plan for the Cayman Islands; we must rescue ourselves.

In order for Cayman to remain a significant player in the world financial industry we have to utilize the best and brightest minds we have available, in both the public and private sectors.

However time is against us and the time for talk is over. It is now time for us to take action but the first action must be to elect the right people on May 20, 2009.

 

Derrington Bo Miller is an Independent Candidate for the District of George Town

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Comments (7)

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  1. Anonymous says:

    finally some sense from one of these candidates!

    I am trying hard to find 4 good candidates for town – pearlina and jonathan esp concerns me, but I cant explain it.

    Why did PPM not attend the Summit of Americas?? that was a perfect oppourtunity to get access directly to Obama (or atleast follow up their so-called Washington meetings the week before)!

    for shame PPM!

    • Anonymous says:

      Mr Miller provides a helpful, albeit generic, overview of the current problem as it relates to the financial services industry, and highlights the importance for us to have a united and cohesive Government on May 21st (day one) to deal with these important issues – not the typical horse-trading that results when independents are elected.

      On May 21 weneed to a united government – not independents who are merely horse-trading (or horse traders in the case of one independent).

       

  2. Knal N. Domp says:

    Bo, why don’t you get some of your ol’ Senator friends together and have them set up an influence-group centred on the growing number of Senators from whose eyes the scales are rapidly falling, and who are now about to see P#44 Obama as the socialist he really is. Maybe we can set up a teeny weeny little bank for them so they can stick all those Canadian dollars they have all been trading their US dollars for, as we all know that when Barack switches on those ol’ printing presses, the US dollar’s gonna be worth diddley…

    So, where’s that dude with the killa idea for setting up a 24/7 instant-settle international currency trading and disbursing bank here in the Cayman Islands? We need to have a little chat…

  3. Anonymous says:

    Very good point re the affected tax havens not coming together to make a more concerted effort to stave off these viable challenges.

    Tax havens like Cayman, BVI, Anguilla, Nevis which have little or no agriculture, no manufacturing, no natural resources to sustain themselves — are wholly dependent on services and tourism.  

    The openly hostile conduct of the UK (one of Cayman’s main competitors for financial services business) towards its OTs such as Cayman made it clear beyond doubt that our interests are now seen by the Brown administration to be adverse to the UK and we are an enemy, a liability and a problem.

     

  4. Bo Miller is right on the button with this and, from what I can tell, most other subjects as well! I trust that the electorate of George Town is paying attention and that they will do the right thing and vote for this worthy candidate. I am definitely giving Bo my vote and would encourage all George Towners to do the same. Here is a sensible, well-balanced individual who is prepared to work for us the people and to work along with whomever else we decide to send to the Legislative Miller.

    CNS: I’ve modified your user name (apologies) to avoid confusion and complaints.

  5. Richard Wadd says:

    I for one have been expressing these same sentiments in my comments on this very CNS website for months. You are the FIRST ‘public official’ that I’ve heard with the same ideas.

    As I have said before, ‘Divided we fall’ should be the NEW motto of all Legitimate Off-shore Financial Centers, who, like the G20, should unite in view of our common interests, and address this ‘Lynching’ with one voice.

    Who will ‘bell the cat’?

     

    • Anonymous says:

      I didn’t think this was Bo’s idea. That’s right, he got it from you Richard. Thanks for bringing that to light.