Cayman questions review
(CNS): Ministers from the Cayman Islands Government have already spoken with the UK Financial Services Secretary, Paul Myners over the proposed review of overseas territories announced by the Chancellor of the Exchequer Alistair Darling in his pre-budget speech. Minister Alden McLaughlin has said that government has tried to find out exactly what the objectives are outside of the stated terms of reference but he said they learned very little.
McLaughlin said that he and other government ministers had held a conference call with Myners last Thursday morning (where they asked him why the UK needed to 'review' the Cayman Islands given the country's high ratings with numerous recent international independent reviews by the International Monetary Fund, the Caribbean Financial Action Task Force (CFATF)and others.
"Our conversation with Myners was not exactly revealing," McLaughlin, who has responsibility for the financial services sector said. "We asked a number of questions in order to try and learn the real objective of this particular review but we did not learn anything new outside the already stated terms of reference."
The Minister said he suspected that the Crown Dependencies, in particular the Isle of Man are the Chancellor's primary target and this is obviously a review related to tax sharing information rather than anti-money laundering or ant-terrorist financing issues. He said that the announcement came on the heels of the G20 meeting and that the UK was under a lot of pressure to come up with answers given the fall out from the Icelandic banks and the general global economic crisis.
What Minister McLaughlin did say the government had learned for sure however, was that a "reviewer of international repute" would be appointed and would be visiting the Cayman Islands sometime in the New Year. McLaughlin said that in the meantime Myners had agreed to meet him when he is in the UK in January and he said he hoped to learn more about how the review would be conducted.
"I think this is going to be something of a rushed exercise as it seems the UK Chancellor wants the review completed before he delivers the UK 2009 budget in March. Whatever the real reason, given the global economic crisis, it is to be expected," McLaughlin added." "This is not driven by local circumstances but we have no difficulty with it and we expect as ever that the Cayman Islands will score highly."
He said that the situation with the review which is clearly tax driven should not make us rush to sign more tax co-operation treaties before the CI government had ensured the agreements were fair to this country as well as to those wanting to sign the information exchanges. "We have had several rounds of talks with the UK about tax agreements but they have not yielded fruit because the UK has changed its position. WE have rescheduled more discussions for early next year and we hope we will get there but we must not sign just for the sake of it we must make sure that the deal is fair."
Darling said the review was because overseas territories and crown dependencies attracted banking customers with lower tax rates without contributing to the UK Exchequer. "Many crown dependencies and overseas territories are significant financial centres in their own right and the financial sector plays a vital role in their economies. The Government recognizes the progress made by most offshore financial centres to improve financial regulation and transparency, and tackle financial crime," he said in the pre budget report. "However, crown dependencies and overseas territories, like all offshore financial centres, face challenges and opportunities as the world is changing. In particular, severe financial turbulence has raised questions for all jurisdictions, while there is growing international pressure to line up standards of financial regulation and meet international norms with regards to taxation."
The terms of reference of the review will include an assessment of financial supervision and transparency; fiscal arrangements; financial crisis management and resolution arrangements; and international cooperation.
"…growing international pressure to…meet international norms with regards to taxation".
This is the key issue. The G20 do not in reality have any legitimate concerns about financial crime in the dependent territories (which are generally well-regulated), but instead their real objective is to eliminate tax competition and therefore our primary attraction as a financial services centre. We need to marshall all our resources to decisively refute the notion that there is an "international norm with regards to taxation" as it immediately suggests that there is something illegitimate about tax competition.
The tax structure of a jurisdiction depends upon the nature of its economy. We do not have the natural advantages of New York and London and is absurd to suggest that our tax structure should be a reflection of theirs.
Let us be clear: the UK's ultimate objective is to destroy our financial industry and it is employing various strategies towards that end.
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