In iNews Cayman yesterday (12) one of our main articles was from Cayman Finance under the heading “Caymanian Compass Online Poll: Cayman should reject FATCA”. It was written by Gonzalo Jalles, CEO, Cayman Finance, in response to a straw poll conducted on the Caymanian Compass website where persons pressed a button to two main questions on whether Cayman should reject FATCA or agree to it.

FATCA is the Foreign Account Tax Compliance Act. FATCA was enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts.  FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

In the Compass straw poll it suggested 58% of all the persons who voted should reject FATCA.

Before the year 1492 and a straw poll was conducted asking #1 Is the world flat? Or #2 Is the world round? I am quite sure at least 95% would answer ‘Yes’ to #2 The world is flat. This is despite ancient references to the Earth being shaped like a disc and observing the sun and the moon in the sky.

You see, when you conduct a straw poll you don’t debate it first. A straw poll is NOT a substitute for discussion. You can actually slant a poll to persuade people to commit themselves to your position very easily.

Before asking the question is the world flat or round. I would state “people disappear every day without trace. The consensus of opinion for this is they fall off the edge of the world. Then you ask the question.

In the Compass poll there was nothing to illustrate the dire consequences of what would happen to the Cayman Islands if Cayman were to reject it.

Gonzalo stated it very plainly. He said:

“If an institution refuses to sign up to FATCA, 30% on every transaction it makes in US dollars would be withheld on their own behalf or on behalf of a customer.  So unless local banks were to sign up for FATCA, from the day of implementation, every time you made a transaction in a local bank, they would take 30% of your transaction value.  Even more, banks clear a CI Dollar cheque by transferring the equivalent US dollars between them in the US, so even CI transactions would be subject to a punitive tax kept by the US.  If the Cayman Islands Government and the banks wanted to escape FATCA, they would need to stop using the US dollar all together, and we would need to create a new currency system where our currency is not pegged to the dollar.  Given the UK and Europe are going the same way, we could not peg it to those currencies either.  Therefore, we would need a floating currency, which will automatically mean the complete disappearance of our international financial industry that represents over 50% of our GDP and government revenue.  Even if we were to make the silly assumption that hotels, restaurants, and every other business would not be affected by this loss, civil servants, elected officials, police, and social services beneficiaries would need to take a 55% cut in their salary, as the Government would loose 55% of its revenue.

“If you still think the Cayman Islands Government and local institutions should have said “no”, I give up.   You should move to Cuba, probably the only country in the world that might remain completely out of it.”

Can the same poll be conducted again?

If that poll had been used to guide the government on the way they should have acted we would now be clambering for their removal.

That’s why straw polls are dangerous and why iNews has stopped doing them.