Something must have hit a nerve.
http://www.caribbeannetnews.com/news-16629--30-30--.htmlCayman bankers lobby Washington to redefine image
Published on Saturday, May 23, 2009
By Kim Dixon
WASHINGTON, USA (Reuters) -- A group from the Cayman Islands lobbied Washington this week to redefine the image of its banks and other financial institutions after President Barack Obama singled out the British territory as a tax haven.
Tony Travers, head of the Cayman Islands Financial Services Association (CIFSA), argues that the islands are getting a bad rap, and he met with lawmakers, staff of members of the Senate Financial Committee and policy experts during his trip to Washington to say so.
"What does trouble us to the point where we are bemused, bothered and bewildered is the rhetoric, the constant reference to Cayman," Travers told Reuters during his visit.
But tax experts said that while Cayman is not the world's worst offender as tax havens go, it has a lot to address.
"I'm not terribly sympathetic," said Alex Raskolnikov, a professor and tax expert at Columbia University Law School.
"Is it true that there are worse offenders? Yes. But it is also probably true that they have been facilitating tax avoidance."
Obama has hammered tax havens, saying US companies and individuals using them should not "dodge their responsibilities while ordinary Americans pick up the slack."
A congressional report has said that each year the United States loses about $100 billion to tax havens.
Obama targeted the Caymans specifically.
"On the campaign I used to talk about the outrage of a building in the Cayman Islands that had over 12,000 businesses claim this building as their headquarters," Obama said this month while discussing measures he wants implemented to curb tax avoidance and evasion. "I've said before either this is the largest building in the world or the largest tax scam in the world."
"The reality of the situation is we have a full transparency treaty with the United States," Travers said, adding that his group supports strengthening the treaty with more stringent reporting obligations.
The Caymans are three tiny Caribbean islands with a population of fewer than 50,000, most of whom live on Grand Cayman Island.
Travers contends that the Caymans have been erroneously grouped with countries like Monaco, Andorra and Lichtenstein, which have been labeled by the Organization of Economic Cooperation and Development (OECD) as the three most uncooperative tax havens in the world.
The OECD labels countries tax havens if they have no tax or minimal tax, no useful information exchange system and a lack of transparency, among other criteria.
The Caymans are on a so-called gray list of countries that have agreed to certain OECD changes pertaining to taxes but have not implemented everything to which they agreed.
The government of the Cayman Islands said it believed the report painted it in "the lightest shade of gray."
With their zero tax rate, the Caymans are home to 80,000 registered companies and had $2 trillion in banking assets as of December 2007, according to the island's monetary authority.
CIFSA supports legislation from US Senate Finance Committee chairman Max Baucus to give the Internal Revenue Service more staff and other necessities to pursue offshore tax evasion. However, the Cayman business group opposes a bill from Senator Carl Levin that calls for increased penalties for failing to disclose offshore transactions.
On its website,
www.caymanfinances.com, CIFSA says its mission is to "communicate the integrity and quality of financial services in the Cayman Islands to both the global and local market places."
An Internet search for banks in the Caymans produces a long list with many recognizable names, among them some of the world's largest financial institutions. Other companies also claim Cayman addresses, but CIFSA's focus is on finance.
"The Cayman Islands is an accomplished international financial center, supported by an impressive list of professionals who are able to offer a broad range of services. As a jurisdiction, we are committed to maintaining the highest integrity and standards of operation as evidenced by our adherence to international regulatory requirements," the website says.
CIFSA represents offshore units of such international banks as Canada's CIBC and Germany's Deutsche Bank.
The place Obama referred to as either the biggest building or the biggest tax scam in the world is Ugland House, on the outskirts of Cayman's capital Georgetown.
Ugland House was the subject of a report last year by the US Government Accountability Office (GAO), which found that information in the Caymans was limited because it was self reported and "concepts of ownership and control are complex." The report is here
"It depends what you think is bad," said Adam Rosenzweig, associate law professor at Washington University in St Louis.
"All you need is one employee and a telephone number to set an office up," he said. "There is no international law that says you can't do it."
He added: "What happened over time has been basically bank secrecy has gotten the biggest negative perception in the market."
Leaders of the Group of 20 of the world's most industrialized countries and other countries helping to shape the economic landscape vowed at a meeting in April to act against tax havens to protect public finances and financial systems.
In a world ravaged by the worst financial crisis since the 1930s, dragging tax dollars into government coffers is a priority for world leaders. It is even more important for Obama, whose administration wants to create fairer distribution of wealth in the United States.
In May, Obama introduced proposals to crack down on illegal overseas tax evasion, close loopholes and make it more profitable for companies to create jobs in the United States.
"I want to see our companies remain the most competitive in the world," Obama said at the time. "But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens.
"The way we make our businesses competitive is not to reward American companies operating overseas with a roughly 2 percent tax rate on foreign profits, a rate that costs taxpayers tens of billions of dollars a year."
The administration also wants to crack down on "abuse of tax havens by individuals."
The United States has sued Swiss bank UBS AG to get the names of 52,000 US citizens it claims have as much as $14.8 billion in Swiss accounts. In doing so, it has taken on Switzerland, historically a tax haven.
The Swiss government has said that revealing the identity of those clients would violate a US-Swiss tax treaty, violate its sovereignty and make UBS break Swiss law.
Switzerland announced in April that it would move toward internationally accepted standards of bank information disclosure in tax fraud cases.
