Cayman will survive, says former chair of CIMA

(CNS):  Despite all the ups and downs for the world of offshore finance recently, not to mention the Cayman Islands own financial troubles, the jurisdiction is set to survive, says Tim Ridley, the former chair of the Cayman Islands Monetary Authority and offshore expert. Speaking at the International Tax Planning Association conference at the Ritz Carlton last week, Ridley said he believed there will continue to be a place for high quality, innovative and adaptive offshore financial centres (OFC’s) and their service providers.

“The pendulum is still swinging against OFC’s for the moment, but unless the world goes back to the dark economic ages, the rhetoric, even from the French and Germans, will reduce and some semblance of balance will return,” Ridley predicted.

Presenting to an audience working in businesses associated with wealth management and tax planning, the former CIMA chair painted a relatively positive future for the Cayman Islands given the recent turmoil.

He said the world is full of global businesses and families, and their number and wealth would increase over time.

“Increased rates of taxation will make proper tax and estate planning for wealthy families even more important and also lead to greater demand for tax advantaged and good places to live where there is access to quality professional services and advice,” Ridley added.

“Global economic competition inevitably means tax and regulatory competition. No one has yet created the perfect tax or regulatory regime, so competing regimes, within broad agreed norms, are perfectly proper, just as there are many ways to make a safe automobile. Individuals and corporations are still entitled legally to maximise their wealth. Indeed, corporations have an obligation to their shareholders to do so.”

Legitimate tax and regulatory planning, he said, would always have a place. “OFCs with high standards of sensible regulation, appropriate transparency, cross border assistance arrangements and good infrastructure and providing quality value-added service have a valuable and vital role to play in this scenario,” he told delegates.

Examining the competition for offshore business, Ridley noted that the barriers to entry for new OFCs were increasing. “The cost of developing the infrastructure and meeting international standards is significant and success cannot be achieved overnight or guaranteed. There are some who are doing it nevertheless, such as Dubai and more recently Ghana and Botswana,” he observed. “Whether they will succeed for the longer term is still an open question. There are probably now too many OFCs. Competition is increasingly fierce, and jurisdictions and structures are increasingly fungible.”

Admitting to being a supporter of the Darwinian principle of survival of the fittest, he noted that the survivors will be those who meet international standards, have an established infrastructure and track record, tax efficiency, professional expertise and support services, a solid and diverse base of business, and the ability quickly to adapt and innovate in the ever changing global environment and to add real value to international transactions and capital flows in an efficient and cost effective way.

“Sitting and saying ‘we are here, the business will come, just show me where I sign’ will not cut it,” Ridley said. “I believe Cayman meets the tests for being a survivor and need not suffer death by a thousand cuts.”

However, he warned that to thrive as a financial services centre Cayman must learn better from history and from its mistakes and work more effectively to be fully accepted as a legitimate participant in the global financial world and to continue to be one of the preferred OFCs for both businesses and individuals.

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