There’s an old adage in politics: when they’re attacking you, it’s usually because you’re ahead.
The attacks were flying fast and furious last week from no less a source than the US Senate Finance Committee where Chairman Max Baucus announced ‘the Caymans have $41 million in bank assets for every resident.’
Aside from the reference to ‘the Caymans’ (we assume he was talking about Cayman) and apparent belief that every resident of these islands is a multi-millionaire, Mr. Baucus’ statements showed a profound disregard for the facts contained in the report being presented to his own committee.
The US Government Accountability Office review of Ugland House and the Cayman Islands finance industry, which was extremely thorough and took about a year to complete, stated that Cayman’s government and its financial services industry were extremely responsive to US requests for information related to suspected tax evasion.
The GAO found that ‘the Cayman Islands legal and regulatory system is generally regarded as stable and compliant with international standards.’
In fact, it is interesting to note that in the 2007 fiscal year, the Cayman Islands Financial Reporting Authority made 25 suspicious activity information requests to US financial intelligence services to follow up on suspected criminal activity. In that same year, US regulators made just six similar requests to Cayman.
The report also found that most of the illegal activity that had occurred was perpetrated by individuals, small businesses or promoters, not large corporations.
If anything, the GAO report showed that there had been a failure by the people who were attempting to evade taxes using offshore regimes to report their own activities.
We can’t imagine why.
The Cayman Islands fully cooperates with US and other international authorities when information is requested. But, as representatives of the Maples and Calder law firm pointed out to the GAO, this jurisdiction has neither the resources, nor the mandate to proactively police violations of every other country’s tax laws.
And the truth is, Senator Baucus knows it.
The laws that allow US-based companies to avoid or put off a 35 per cent corporate tax by using offshore financial centres are US laws.
Mr. Baucus knows that as well.
He and his Senate colleagues have the distinct privilege, as US lawmakers, to affect change in that policy if they wish.
The question is, will they?
If they do, are they willing to risk the devastating financial affect on US companies and potential further job losses that could occur as the result of such a move? Are they ready for the US economy, already plagued by a fading dollar, rising unemployment and a lending crisis, to face a further weakened position against international competitors?
To be sure, Cayman and many other offshore jurisdictions would suffer great loss, along with US businesses. Frankly, there’s very little Cayman can do if American politicians decide to cut off their nose to spite their face.
The Caymanian Compass sincerely hopes our country’s financial services sector is considering alternative markets right now to diversify its interests, as opposed to waiting until disastrous legislation is approved by lawmakers who are striving to maintain their office.