Cayman Islands hits back at columnist’s claims
Tom Burroughes Group Editor in London Wealth Briefing
Editor’s note: The promotional organisation for the Cayman Islands’ financial industry has written a sharply worded defence of the jurisdiction after it was attacked by Simon Jenkins, a high-profile newspaper columnist in the UK’s Guardian newspaper, on 22 May.
In a letter signed by Gonzalo Jalles, chief executive of Cayman Finance, and which that organisation says was not published by the Guardian, he slams as “irresponsible” claims that the Caribbean jurisdiction is a repository of laundered money and other illicit finance.
The letter was emailed to this publication and others and is reproduced here in full. The senders of the letter claim the article has not – as of the time of publication – been published by the Guardian. As always, this website does not necessarily endorse all of the opinions expressed in such an item, and is grateful to readers if they wish to add to the debate.
Simon Jenkins’ article “First, David Cameron should bring his own tax havens to book” (May 22) has an alarming number of inaccuracies.
Jenkins claims that Cayman is “the worst culprit, has a government accountable to Britain that enforces banking secrecy, levies zero company tax and is consequently home to the biggest money-laundering and tax-evading operation this side of Dubai”.
For a start Mr Jenkins should do his basic homework. Cayman does not have bank secrecy and has not had for a very long time. Cayman privacy laws are not significantly different to those of the UK, US or any G20 country.
In regards to money laundering, the Financial Action Task Force is the multinational body that evaluates a country’s performance. Cayman rates in line with France and very close to the UK, ahead of many so called on-shore jurisdictions. This information is readily accessible online.
The Cayman Islands government take a tough stance on tax evasion by implementing the European Union Saving Tax Directive, Financial Action Task Force mutual evaluation, the peer review process of the OECD Global Forum on Tax Transparency, and signing over 30 Tax Information Exchange Agreements, some originally signed over 20 years ago.
As was noted in The Guardian on 2 May, Chancellor George Osborne revealed that all British Overseas Territories with significant financial centres have signed up to the UK government’s strategy on global tax transparency and indeed the Cayman Islands led the way on this initiative.
This strategy means that OTs automatically share information bilaterally with the UK and multilaterally within the G5 and whichever additional country joins the initiative. Much greater levels of information about bank accounts will be exchanged on a multilateral basis as part of a move towards a new global standard, including the beneficiary of the account even if such account is not in their name.
On 15 March, Cayman’s minister for financial services announced our commitment to enter into a FATCA Model 1 Intergovernmental Agreement with the US for the automatic exchange of tax information, together with a parallel UK agreement adhering to the same timetable.
Since 2005 the Cayman Islands have engaged in automatic exchange of tax information with all EU Member States for the purposes of the EU Savings Directive. Cayman is committed to build on this experience by joining the pilot multilateral automatic exchange of tax information, announced recently by the UK, France, Germany, Italy and Spain.
It is deeply irresponsible for a writer and former editor of Mr Jenkins’ calibre to plunge into areas where he clearly has no technical knowledge, and without undertaking basic research.
We remain available to help him or any of your reporters understand the truth about Cayman and its success.
For more on this story go to:
Guardian article referred to above:
First, David Cameron should bring his own tax havens to book
By Simon Jenkins The Guardian
I cannot see the point of tax havens. Or rather, I can see the point, but not why we tolerate them. They are licensed theft from the exchequer, offshore fiscal Scud aimed directly at the nation’s budget. For a decade politicians in Washington, London and elsewhere have railed against them – but done nothing.
Years ago I, by mistake, slipped an income tax voucher for March into my folder for April. This delayed payment to the next tax year. Somehow I was detected. I was dragged before Her Majesty’s inspector, reprimanded and hit with a swingeing fine – just to show who was boss.
I wish my name had been Goldman Sachs, Amazon, Starbucks, Google or Apple. I would instead be popping in and out of Downing Street, lunching with the chancellor and having “sweetheart” conversations with HMRC, offering them a few quid out of kindness as I left. The only downside would be a day spent before an “influential” Commons committee, listening to some bat called Margaret Hodge boring on about how evil I was.
We cannot open a paper these days without reading tales of the fiscal antics of big corporations. Ever since the tycoon Leona Helmsley declared in 1989 that “only the little people pay taxes”, taxpayers have grown littler and littler. Treasuries have become more grasping. The wealth of the world has grown inexorably. But Helmsley’s law has held good. Taxes are paid by fools. Real men go offshore.
In the early days of the internet, companies such as Amazon, Google, Apple and Facebook had liberal, funky images. Their staff said things like “awesome” and offered a service free at the point of delivery. They were the welfare state of the wired generation, and the left loved them.
Now they are grasping capitalists like the rest. They float their balance sheets on wild prospectuses. They gobble up competitors with leveraged deals. They buy hardware from cheap labour subsidiaries. Above all, they avoid tax by burying their businesses on Caribbean islands or in European principalities. The internet is built on a gigantic subsidy from the taxpayers of the world.
The sheer gall with which the new cyber-corps defend tax avoidance is astonishing. They either claim that they employ lots of people and that is good enough, on which argument hardly an employer would pay tax; or, like Amazon, they pretend their real “business” is nowhere near where they trade. In four years, Amazon has paid just £10m tax on £12bn of UK sales, since it was really “in” Luxembourg.
Likewise Google operates through companies lodged in Dublin, where tax can be negotiated close to nothing, while its large UK operation is merely “encouraging” sales. Since 1998 Starbucks has paid just £8.6m in corporation tax on £3bn in UK sales. Its boss said he might “negotiate” a bit more, but really Britain was just a “franchise”.
Whose intelligence are these people trying to insult? And they are the tip of an iceberg, which Tax Justice Network estimates is a vast slew of $21 trillion stashed away in tax havens.
Nor is only company tax foregone. The Times recently calculated that £4.5bn in income tax was unpaid by individuals doing business in Britain but declaring offshore status. Some £1bn was unpaid by UK “residents” of Monaco alone. Most of these people earn so much money that they could pay their taxes and hardly notice. The intention can only be to cheat other citizens of what should be a shared obligation to support the state.
Every now and then politicians get hot under the collar about offshore tax, though usually only in opposition. In power, like Peter Mandelson, they get “intensely relaxed … about the filthy rich”, largely because they enjoy their company. The G20 in 2009 said it would get tough with tax havens. It did not. Nor did Alistair Darling or Gordon Brown. The Bank of England did nothing. HMRC did nothing. The CBI did nothing – its president, Roger Carr, pleading last week that “taxation cannot be about morality”.
The irony is that the cyber-corps are now being hounded not by government, or the long arm of the fiscal law but by the web. It is the nerd in the attic, the downloader, the whistleblower who is hacking into tax haven records, publishing lists of tax dodgers and supplying information to the Revenue. Even then the only remedy is “name and shame”.
There are proposals to force firms doing any sort of business in Britain (and hopefully Europe and the US) to register their profits wherever they operate, and be assessed for tax pro rata. The trouble is that any company whose business is not nailed to British soil seems to treat corporation tax as voluntary. It might be better to ease it out in favour of sales tax, business property tax and, if the City bites the bullet, a financial transactions tax. Meanwhile we gasp at the absurdity of HMRC in ignoring the cyber-corps’ gigantic warehouses and gleaming London offices as evidence of “business”.
The biggest challenge lies in the havens themselves. Why do they survive as part of any tolerated union? Brussels is ruthless in enforcing its rules on members, yet indulges such fiscal miscreants as Luxembourg, Liechtenstein and Monaco. Why does it not excoriate Switzerland?
The British Crown retains “dependencies” that enjoy the benefits of UK citizenship and yet harbour people who are lifting billions of pounds from UK taxpayers. The Cayman Islands, the worst culprit, has a government accountable to Britain that enforces banking secrecy, levies zero company tax and is consequently home to the biggest money-laundering and tax-evading operation this side of Dubai.
British governments sometimes claim they turn a blind eye to these practices and places because they fear the tax-dodgers might go further afield, to the Gulf and the east. Why not then ban the dodgers from residing in England and their “companies” from operating in England – and, if Europe means anything, from Europe? Besides, we do not allow fraudsters free rein for fear they might take their business abroad.
David Cameron and George Osborne have commendably reiterated opposition to tax rackets that drain some £7bn from their revenue each year. Both have condemned tax “avoiders” and their accountants. Next month the G8 is again purported to be “getting tough on tax havens”, this time at Cameron’s bidding. He would carry more conviction if he brought his own havens to book.
For more on this story go to:
http://www.guardian.co.uk/commentisfree/2013/may/21/cameron-bring-own-tax-havens-to-book
