Archive for the ‘Agreements and Treaties’ Category

Once more, the truth about Cayman transparency

Wednesday, July 21st, 2010

I suppose the nature of this ongoing debate is that we at Cayman Finance keep restating the facts and those with alternative agendas keep ignoring them.

There are all types of unaccountable sensationalist blogs, publications and fringe socialist groups that like to appeal to the lowest common denominator in the name of ‘the common good’ and the Huffington Post is no exception.

Notwithstanding our recent advice to the editorial staff and indeed Ms. Huffington herself, the site loses all credibility when they continue to allege that the Cayman Islands are ‘secretive’.  For the record, one more time plain and simple, so everyone should  get it, in addition to the All Crimes Treaty which gives the Department of Justice full authority to obtain any Cayman Islands file, there is the Tax Treaty which extends the transparency to the IRS  for any tax matter and in addition, there is the IOSCO regulatory transparency.

Those who are able to read and understand these treaties, (not incidentally negotiated and signed by the US Government) will be trying to figure out what exactly the Huffington Post is talking about?  Perhaps what they mean is that they are upset that there are perfectly lawful provisions of US tax law which enable US corporations to avoid being taxed twice and which will allow those corporations to remain competitive in the global marketplace as against those corporations from jurisdictions that tax their corporates only once.  If that is the cause of the upset by all means change US law but the Cayman Islands has nothing to do with that discussion and making up fantastic numbers about “lost revenue” is going to lead to disappointment.

But do bear in mind also that there is an unintended consequence to rendering your global corporations less competitive (Levin/Dogget) and to rendering inward investment into the US so problematic that no one wants to bother any more (Hire Act ), particularly, one would have supposed, when you are the largest debtor nation in the world and survive only on inflows of borrowed money.

Posted in Fiction vs. Fact, USA, Uncategorized | 2 Comments »

Cayman Finance letter to Huffington Post

Wednesday, June 23rd, 2010

Dear Ms. Huffington:

Your recent post citing the Cayman Islands in a list of “tax havens” is unfair and inaccurate.  The Cayman Islands — far from being a “tax haven” — are on the elite OECD global “white list” of jurisdictions that meet the highest standards for financial transparency.

FICTION: The Cayman Islands are a “tax haven.”

FACT: The Cayman Islands has full tax transparency with The United States and with 27 members of the European Union.  The US Department of Justice has had full authority to make enquiry in relation to any file in the Cayman Islands since 1990. The anti-money laundering legislation of the Cayman Islands has been evaluated by the International Monetary Fund and by the Financial Action Task Force and is found to be superior to that Of the United States and most EU jurisdictions.

FICTION: Offshore accounts such as those in the Caymans are used by multinational corporations to avoid paying any taxes or to commit tax fraud.

FACT: American corporations already pay taxes in the jurisdictions where they operate.  Additionally, all profits of subsidiaries of US parents — regardless of where they are incorporated — are consolidated and accounted for and taxable in the U.S. as profits of the parent, except to the extent that legitimate tax deferral applies under current IRS code.
Offshore financial centers, like Cayman, enable American companies to compete internationally and reinvest their profits; treaties with the U.S.
ensure they do not evade taxes.

FICTION: U.S. policies regarding “tax havens” and tax deferral for US multinationals are linked.

FACT: The issues of offshore financial centers and tax deferral for US multinational corporations are separate.  The future of tax deferral laws in the United States is an internal U.S. tax matter.

FICTION: Corporations cheat the public out of tens of billions of dollars a year by using offshore tax havens.

FACT: The financial services sector in the Cayman Islands is enormously important to the economic growth of the United States. Cayman financial services institutions pool funds from the international capital markets and direct those funds into investment opportunities in G20 jurisdictions. The impact of those investments in growing the American economy cannot be overstated.

FICTION: Money flows from the U.S. to the Cayman Islands, where it is hidden.

FACT: The favored location for Cayman funds to invest is the United States; the preponderant flow of capital is from the Cayman Islands into, not out of, the U.S.

Let’s keep the facts straight and avoid name-calling. Most of what Americans think they know about the Cayman Islands is wrong.  It¹s time to learn how our financial services industry is working to promote economic growth in the United States and around the world at http://www.caymanfinances.com.

Cayman Finance

Posted in Fiction vs. Fact, Tax Issues, USA | 1 Comment »

“Rumors of our demise are greatly exaggerated”

Tuesday, April 6th, 2010

Whilst the taxpaying public and corporations in many G20 jurisdictions are battling the effects of the increased taxation, in fact international capital is starting to flow once again, hedge fund returns are up ticking. Now it is useful to take a hard statistical look at how Cayman’s financial services industry has fared through the crisis

One of the easiest figures to get a handle on is the number zero – the total number of banks and financial institutions that failed in the Cayman Islands during this latest financial crisis. Perhaps Gordon Brown and Alasdair Darling are simply badly briefed, but there is no statistical basis for the suggestion that instability exists within the Cayman Islands regulatory regime and their criticisms of it are ill founded.  No doubt, without the power to print money like their UK and US counterparts the Cayman regulatory authorities are simply not in a position to bail out private enterprise, and therefore require a more risk-adverse and prudent set of operating guidelines to be practiced by the Cayman banking sector.  If we allow the facts to get in the way of the negative PR for just a moment, we find the strength of the Cayman banking industry well evidenced by deposits and interbank bookings, now tracking at $1.795 trillion which is slightly behind the peak of $1.9 trillion recorded in September 2007, but still a healthy overall figure considering the global climate in which this sector has been operating and considering that there have been zero depositor losses.

Registered investment funds fell from 9,870 as at December 2008 to 9,523 at the end of 2009, but are still well ahead of the 8,751 funds in 2007.  A new growth trend is evidenced – January 2010 figures show 147 new fund authorisations and only 58 terminations. This compares quite favorably to the 106 authorisations and 39 terminations seen in January 2008 and is on target with the natural attrition trends experienced in the healthier market periods of years past.

These Cayman Islands fund statistics are surprisingly being used by some, who doubtless believe their own PR, to suggest major outflows of fund business are occurring from Cayman. In fact the drop is around 4% and after the worst financial crisis in a century this seems more like a sign of a strong fundamental belief in the jurisdiction. And where did the 4% go? There is no evidence they went anywhere other than into liquidation as a result of poor investment return and certainly not to Dublin where if we make a like-for-like comparison, we find that Irish domiciled funds fell from 5,025 to 4,627 over the same period, which is more than double the Cayman decrease. It must be also pointed out that the Irish, to boost their numbers, include sub-funds in their calculations, whereas in Cayman sub-funds are not included.  More interestingly, Irish fund listings fell from 1,605 to 1,270 during this same period, which is a loss of greater than 20 per cent and is consistent with the general malaise affecting the Irish economy.

In the insurance division, the story is brighter yet with the Cayman Islands Monetary Authority (CIMA) reporting the 2009 number of total insurance companies (including both domestic and international insurers) at 815, which is up 10 from year ending 2008 and 22 over the 2007 total of 793.  Captives specifically have experienced gains over this period, rising to 780 at the end of 2009 from 765 in 2007.  The assets held in the captive insurance industry have risen from $36.8 billion in 2008 to $44.7 at the end of 2009, an 18 percent increase.  By contrast, the largest jurisdiction for the captive insurance industry, Bermuda, reports 1,140 captives holding $84 billion in assets, which is down from their 2007 report of 1,149 captives holding $88.8 billion in assets.  Cayman, the second largest domicile for captives, continues to obviously gain ground against its major competitor.

Overall, these numbers are strong and prove the resilience of Cayman’s financial services industry and suggest that Cayman structures are essential to the global flow of capital – a key to economic recovery everywhere. The question that has not yet been asked, given the strength of the capital flows through Cayman, is the extent to which the protectionist elements of both the HIRE Act 2010 in the US and the European Funds Directive will have the unintended consequence of drying up the flow of funds from Cayman to the US and Europe at a time when the funding requirements of both are increasing, not decreasing.  The more logical consequence of the most recent iteration of the European Funds Directive is that rather than Cayman hedge funds wishing to move to the EU, fund managers who wish to continue to run a hedge fund proper must move out of the EU.

The recession has not completely leapfrogged the Cayman Islands as transactional volumes have decreased, as no doubt have assets under management (we await the latest CIMA figures).  The business community as a whole has had to downsize accordingly.  Streamlining into leaner operations is to be expected as part of a normal business cycle and so too Government must downsize the public sector expenditure   But, in what has hopefully been the most trying financial period our generation will have to face, the Cayman product has shown extraordinary fortitude, exhibiting both strong demand and staying power.

Anthony Travers

Cayman Finance.

Posted in Banking, Fiction vs. Fact, G20, Hedge Funds, other investment vehicles | 3 Comments »

OECD giving up moral high ground

Thursday, January 28th, 2010

The latest statement from the OECD regarding its ongoing global tax collection quest establishes a new gold standard in irony.

In a Reuters online article by Tamara Vidaillet, which can be viewed here, Geoffrey Owens , head of the OECD tax division (is there another division?), says that he fully supports the use of illegally obtained, or stolen, client information from financial firms in order to track down tax cheats.

“What we don’t condone is taxpayers who do not comply with their obligations,” said Owens, seemingly oblivious to the well established principle of international law that renders a tax liability in one jurisdiction unenforceable in another, and the illegality involved in violation of an individuals’ right to privacy.

So we have established the new world order, which appears to state that the promotion of and the outright violation of criminal law in countries where private data is protected is appropriate if it meets with the objectives of an international body.  This would be worthy of greater study if it were the case that this new principle conforms with the objectives of the OECD as set out in its constitution.  But it does not; the objectives of the OECD, publicly promoting the economic well being of member and non member organizations, are strangely silent on the subject of renegade lawlessness.

So, as we understand it, the OECD message is now that it is acceptable for their members to violate local and international law if it benefits them fiscally?  That is at least showing the OECD to apply the same moral and legal standard as the shadowy ‘tax evaders’ are accused of.

What this latest statement reveals, with absolute clarity, is that OECD and its executive has abandoned any pretence of inhabiting the moral high ground and is now acting out of greed, desperation, and institutional arrogance.  The OECD now feels able to flaunt its disregard of the rule of law and the rights of sovereign nations in a self-described pursuit of international tax  ‘justice’.

Whilst none of this is of direct relevance to the Cayman Islands, which has an extensive network of proactive and reactive tax reporting treaties with the US and the EU jurisdictions, as we have discussed in previous blogs, there is a greater concern here.  The recently expressed objectives of the OECD do not extend simply to tax evasion.  The OECD believes that any form of tax competition is harmful and, we conclude, feels now that its disregard for law and principle may extend to the pursuit of any of its objectives.

Theft of your private data is being justified today.  Will theft of your family’s savings be next?  That sort of conspiracy theory should remain the stuff of Hollywood films, but sadly the OECD’s statements are suggesting we are already on that path.

Now more than ever proactive businesses and individuals need to consider whether a move to a fairer, more progressive jurisdiction might be the best way for them to create or protect their wealth.

Posted in OECD, Tax Issues | No Comments »

Positive Movement on US Legislation

Tuesday, October 27th, 2009

Three prominent members of the US House and Senate issued a joint press release outlining their proposed legislation to prevent US residents from unlawfully evading taxes.  The legislation includes comprehensive proposals to clamp down on tax evasion and improve taxpayer compliance by giving the IRS new administrative tools to detect, deter and discourage offshore tax abuses.

This entirely reflects the confirmations that Cayman Finance have received from key staffers in Washington in that the “list “based approach, favored by Senator Levin’s proposed legislation, appears to have been rejected in favour of a transparency based approach.  Whilst the legislative process has not yet got underway we are pleased that these proposals are entirely consistent with the approach suggested by Cayman Finance.

New regulations would force foreign financial institutions, foreign trusts, and foreign corporations to provide information about their U.S. accountholders, grantors, and owners, respectively.  Chairman of the Ways and Means Select Revenue Subcommittee, Mr. Richard Neal said ““This bill is a continuation of my efforts to reduce tax evasion by American citizens and bring more transparency to international banking.”

This is obviously very positive news for the Cayman Islands, which has been a fully transparent jurisdiction for the last decade and a leader in regulatory and compliance issues related to global finance.  We can only hope this will finally put to rest any and all efforts by G20 nations to portray Cayman as a ‘tax haven’ and that we will not be forced to repeatedly jump through the same old hoops to prove what must now be evident to anyone with knowledge of global financial markets – namely that the Cayman Islands is the last place on earth that individuals would choose for the purpose of evading taxes.

Posted in Tax Issues, USA | 6 Comments »

Tightening the noose

Friday, October 23rd, 2009

Last month French bank BNP Paribas announced to the world that it will stop operating in countries that are on the ‘gray list’ published by the OECD.  This decision, the first of its kind by any major bank, puts Panama and the Bahamas directly at risk of losing business and increases pressure on all gray-listed countries to conform to the OECD mandate.

While this type of gamesmanship will not affect the Cayman Islands today, due to our OECD White List status, it does raise concerns for smaller nations such as ours that the playing field will continue to be modified by G20 nations until they achieve their ultimate goal: the “one size fits all “global tax rate .The G20 nations intend to use every opportunity to raise taxes from any source in order to deal with increasing national debts.

With all of the recent focus on Cayman’s debt, which stands at a realistic 25% of GDP, it may surprise some people to discover that UK debt, according to their own statistics office, at the end of March 2009 was equivalent to 55.5% of GDP and unofficially, if unfunded public sector pension liability is included, may amount to three times that figure. Similarly France’s public debt rose to 73.9% of GDP in the second quarter of 2009, and estimates for the US put their figure at close to 90% of GDP for 2009 and is expected to top 100% in the near future.  Little wonder then why these large economies are seeking to exercise their combined might to force smaller nations like Panama, the Bahamas, Barbados, and even the Cayman Islands to change their policies on taxation.

The belief shared by the G20 nations is that low tax regimes are ‘unfair’ and rob their governments of desperately needed tax revenue.  What this theory fails to consider is what drives the economic growth of these large economies.  The answer is not tax dollars, but investment dollars.  And without tax neutral jurisdictions, like Cayman, it would be more difficult, not less difficult, for onshore jurisdictions to attract international pools of investment capital that find their way into these economies.

So the question is:  Will the G20 nations recognize the negative impact to their economies by excluding their own financial markets from accessing offshore financial centres? By attempting to put the squeeze on offshore centres they may unwittingly be tightening the noose around the neck of their own economies.

Posted in Agreements and Treaties, Corporate, Fiction vs. Fact, G20, OECD, Tax Issues, USA | 2 Comments »

Keeping friends close…

Friday, October 23rd, 2009

CIFSA was pleased to hear that the Cayman Islands Government (CIG) was able to obtain a seat on the 14 nation Steering Group responsible for assisting in the restructuring of policy for the OECD Global Forum on Transparency and Exchange of Information. The Global Forum is the final decision making body for OECD on these matters.

The Steering Group will receive detailed methodology and terms of reference from a Peer Review Group that is currently setting up a ‘robust, transparent and accelerated process’ that will evaluate how countries implement tax information exchange agreements.

CIFSA has been encouraging the CIG to develop closer ties with overseas governments and international bodies such as the OECD, which were going to introduce new legislation and regulations affecting our industry.  And, as they have thus far done in other areas, the CIG responded in a timely and effective manner.  In some ways we are seeing a return of the public/private sector partnership that first made Cayman great.

It is vital for Cayman to have a seat at the table to ensure decisions are based on factual evidence and not political expedience.  The OECD’s willingness to invite OFC’s into this process offers new hope that the process will be open and fair to all parties.  This is yet another opportunity to communicate to foreign governments our jurisdiction’s record with respect to regulation and compliance, and to dispel myths about our financial services industry.

Needless to say CIFSA will continue to closely monitor the OECD process as well as legislative initiatives around the globe that could impact our jurisdiction.

Posted in G20, OECD | 1 Comment »

Rumours of Cayman’s demise greatly exaggerated

Sunday, October 4th, 2009

I had occasion to respond to an article published 14 September by the Guardian in the UK, titled Britain may be forced to bail out offshore tax havens.    In particular, the very first paragraph caught my attention.  It read: “Britain could be forced to bail out one or more of its offshore tax havens at huge cost, according to early drafts of a Treasury report, because the economic crisis has wrecked their finances.”  This was certainly news to me.

The article went on to speak directly about Cayman’s finances although it was clear the writer did no direct research into the facts surrounding the matter.  He certainly was not aware that the Cayman Government has several banks willing to lend them  £278 million pounds due to our recently confirmed triple A credit rating.  And in describing the size of that borrowing as ‘huge’ and possibly leading to ‘economic failure’ the writer somehow overlooked the fact that our short term funding issue is hardly on a par with the financial misadventures of the UK or US.  Indeed the borrowing Cayman is seeking is equivalent to less than half a day’s current overspend by HM government.

The full text of my response can be found here http://www.guardian.co.uk/business/2009/sep/16/tax-havens-cayman-guernsey

Not coincidentally CIFSA and the CIG received a request for an interview from a German reporter about the ‘potential bankruptcy of Cayman’.  What we are witnessing seems to be a third stage in an organized effort to damage the reputations of all Offshore Financial Centres.

The first stage was the attempt to lay blame for the financial crisis and stock market meltdown of 2008 at the feet of OFC’s.   That effort failed miserably under the weight of factual evidence to the contrary but it took many weeks and months to undue the damage done by the initial headlines and speeches.

The second stage was the lost taxation argument which saw the creation of the OECD White List and had politicians quoting ridiculous sums of revenue they could collect if given information on secret accounts in Cayman and elsewhere.  Once the Obama administration had to actually produce a budget they finally had to admit that there is no windfall tax revenue to go after and no secret bank accounts in the Cayman Islands.  Again, the initial story received much greater coverage.

So now we have entered this third stage in the propaganda war.  This latest effort seems intent on disparaging the financial viability of many OFC’s, Cayman included, despite the recent validation of our triple A credit and ignoring our ability to raise revenues from a variety of sources (which stands in stark contrast to the severely overtaxed populations in the US and UK and many other onshore jurisdictions).

As with the previous efforts this one will ultimately fail as well once more attention is drawn to the issues and more responsible news outlets and individuals delve into the facts.  CIFSA will continue to work diligently on behalf of the jurisdiction to ensure the truth is not overwhelmed by political rhetoric aimed at harming our key industries.

As always the truth is our strongest ally.  Our financial services industry will continue to offer services that are valuable and necessary for the efficient operation of the global economy.  Efficiencies that just so happen to help create jobs in the very countries that are most critical of us.

Posted in Fiction vs. Fact, G20, OECD | 2 Comments »

CIFSA Update for August

Friday, September 11th, 2009

CIFSA has been actively promoting its revamped public affairs and public relations campaigns for what has been an eventful few months. The most notable result has been the success of the CIFSA campaign to promote the inclusion of Cayman on the OECD White List.
CIFSA Chairman Anthony Travers has been heavily engaged in his role as spokesman for the association. His most recent letters and commentary have been published in The Washington Times, Hedge Fund Journal, and The Nation and he has been quoted extensively in articles by The Economist, Reuters, Dow Jones Newswire, Hedge Fund Manager Week, Global Investor magazine, Worth Magazine and other foreign press. Mr. Travers has also appeared internationally on the BBC World Radio News, Bloomberg and closer to home on Cayman 27. Over the coming weeks the Chairman will be meeting with a series of national Editors in the UK to continue his lobbying efforts in support of Cayman’s financial industry, building on his commentary on industry issues like the EU Alternative Investment Funds Directive. In September, Mr. Travers will be attending the London based FT Global forum, sponsored by CIMA.
“There exists in some quarters still an entrenched mischaracterisation of the Cayman Islands, as a place where certain individuals hide their money from foreign tax officials.”, says Mr. Travers. “The single greatest challenge in my role as Chairman of CIFSA is to expose the fallacy of these misperceptions in the light of the factual record. To that end CIFSA engaged the services of established lobbying & PR firms in Washington and London to assist us in this area. And we have already seen tremendous progress in tearing down the old stereotypes.”

In July, CIFSA hosted the much anticipated visit from Washington lobbyists Quinn Gillespie and Associates. Jack Quinn and Manuel Ortiz of QGA spoke at the CIFSA dinner event and had a series of meetings with senior members the CIG, the Cayman Islands Stock Exchange, and the Cayman Islands Monetary Authority.

In August the CIG formally signed a Tax Information Exchange Agreement with New Zealand, bringing the total bi-lateral TIEAs for the Cayman Islands to twelve. Having reached the required number of TIEAs, as set out by the OECD, the Cayman Islands was subsequently added to the OECD White List.
This is a significant accomplishment for the new government in just a few short months since taking office. CIFSA representatives sit on the government’s Financial Services Council, and regularly attend meetings with CIG on matters that concern the industry. CIFSA is also represented on the newly formed Investment Council which is focused on private sector initiatives to attract business investment to Cayman.
CIFSA fully intends to remain alert and responsive to new challenges that may present themselves and proposes to be proactive in developing relations with foreign governments and media. The truth remains our strongest ally in attempting to dispel myths and cultivate more accurate perceptions of our financial services around the world.
The inclusion of the Cayman Islands on the White List is an important step for the industry but CIFSA does not intend to rest upon that accomplishment. We recognize, and are monitoring, the initiatives that many foreign governments are considering to legislate in a way they hope will increase tax revenues and limit the use of offshore vehicles that legally minimize tax payable. CIFSA proposes to work with CIG to educate policymakers and lawmakers about the positive impact offshore vehicles have on global competitiveness, investment, and employment in developed countries.

Posted in Local Events, OECD, TIEA, Uncategorized | 1 Comment »