A day after Barack Obama announced plans to curtail Americans using overseas tax havens, the head of Cayman’s financial services association hit back at the US president’s assertions that the country was engaged in tax fraud and evasion.
Anthony Travers, chairman of the Cayman Islands Financial Services Association, released an open letter to President Obama, insisting that the Cayman Islands was cooperate fully with the United States and was not engaged in illegally enabling US companies to avoid paying taxes.
Mr. Travers said he would travel to Washington DC shortly to speak directly on the subject.
In the letter to the president, sent on 5 May, Mr. Travers said CIFSA was ‘gravely concerned about your remarks regarding the Cayman Islands, which erroneously suggest that the subsidiaries of US corporations operating in Cayman are engaging in tax fraud merely because they are registered to do business here.
‘Nothing could be further from the truth.’
He said the association believed that Cayman-based corporate subsidiaries operate legally and transparently and are aware of no information to the contrary.
‘The Cayman Islands has a low tax rate, just as do Ireland and other jurisdictions. That is not a bad thing; it certainly is not the basis upon which to suggest illegality in the form of tax evasion.’
He pointed out that tax deferral arose from current provisions of US tax law, which was designed to provide a competitive advantage to American companies in global trade, but was ‘not fraud, evasion or artificial avoidance’.
On Monday, Mr. Obama referring to Maples and Calder, said more than 12,000 US businesses claimed to be headquartered in a single building in George Town.
‘Either this is the largest building in the world or the largest tax scam. I think the American people know which it is. It is the type of tax scam we need to end,’ he said Monday, as he announced plans to overhaul tax policies and save US taxpayers $210 billion in the next 10 years.
Mr. Obama said the US Internal Revenue Service would hire 800 more IRS agents to detect and pursue American tax evaders abroad.
In his response to the president’s comments, Mr. Travers said some US companies had historically used tax deferral to boost capital they had available for reinvestment, expansion and job creation. ‘We fully recognise that the issue of tax deferral is a matter for the US Government to determine, and we state no view on that subject.’
He added that for more than two decades, Cayman had cooperated on international initiatives from the US, the International Monetary Fund, the Organisation for Economic Co-operation and Development and the Financial Action Task Force to create a ‘robust, accountable, transparent and fair’ financial regulatory structure.
He said there had not been a single bank failure in the Cayman Islands during this financial crisis. ‘None of the financial recklessness that has brought about much of the current global crisis occurred in or involved the Cayman Islands. Rather, to the contrary, the investments which flow from the 12,000 companies involved with the United States have provided trillions of dollars of international investment to US financial institutions at a critical period, and have done so in a fully transparent manner.’
He extended an invitation to work more closely with Mr. Obama and the US administration, saying: ‘We are confident that this will enable you to share our conclusion that US citizens do not use the Cayman Islands to evade tax.’