Stones and glass houses, offshore tax haven edition
The financial crisis has not been kind to the Caymans. Hundreds of hedge funds have collapsed and global banks have slashed jobs. As if this was not enough, President Barack Obama in the spring launched a crackdown on tax havens that forced a number of Caribbean islands, including the Caymans, to embrace greater transparency – after a fashion.
Things are so bad that the government of the Cayman Islands is facing a $82m revenue shortfall in the budget. Local officials say they need a big loan or the government risks bankruptcy.
However, the British government – which oversees the islands – last week vetoed the loan. Chris Bryant, the British Foreign Office Minister, said he would not approve any new lending until he was convinced the Caymans had their house in order. He even suggested the islands might have to introduce – horror of horrors – income taxes in order to make ends meet.
It would be unwise, I suspect, to rely too heavily on a rapid improvement in trust fund income or to expect that the Cayman Islands’ prosperity can presume on an off-shore tax haven status.
Bryant would appear to have a point. But the island’s financial authorities think the British have other, baser, motives. As Anthony Travers, head of the Cayman’s financial services authority CIFSA, told Reuters’ Lorraine Turner:
We believe there is another agenda, which seems to have more to do with the competition for financial services and concern that unreasonable tax rates in G20 countries will cause an exodus of people and financial services companies
Well, he would know.