Archive for the ‘OECD’ Category

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 »

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 »