Cayman Finance reject claims by business group

Cayman Finance has rejected claims
by US business group Business and Investors against Tax Haven Abuse that low-
or no-tax jurisdictions encourage tax evasion and damage the US economy.

The campaign, which combines three
non-profit groups — the American Sustainable Business Council, Business for
Shared Prosperity and Wealth for the Common Good — recently, released a report
stating that US multinational corporations avoid at least US$37 billion in
taxes each year through the use of tax havens.

Essentially the group criticises
tax havens for creating an unlevel playing field where tax-paying small and
medium-sized businesses have to compete against tax-dodging larger enterprises.
By using tax havens, larger multinationals are shifting the tax burden to
individuals and small businesses, the report claimed,

At the same time, multinational
companies continue to rely on US infrastructure, such as roads, airports,
courts, telecommunications, public education and other public services, that
are largely financed by others, the group said.

“This $37 billion could be used to
fund initiatives to support America’s small businesses — the nation’s biggest
job creators — by increasing their access to capital, increasing their
opportunities to invest and rewarding entrepreneurship,” the report stated.

New laws called for

The report calls for laws that
would block transfers of intellectual property designed to evade taxes, ban
shell corporations that claim to earn profits offshore, although the corporation’s
management team is based in the US, repeal a rule that allows American
corporations to reduce or eliminate their US tax bills if 80 per cent of their
business occurs overseas and penalise government contractors that use tax havens.

In an open letter to Senator Carl
Levin, who endorses the group, Cayman Finance Chairman Anthony Travers said:
“This mischaracterisation is not only grossly misleading in describing the
proper function of the offshore financial centre and the benefits it confers on
the United States, but forms a wholly unsound basis on which to formulate
United States tax policy.”

Mr. Levin had earlier backed the
campaign in a statement saying: “The Business and Investors Against Tax Haven
Abuse campaign represents the first time in recent years that business people
who believe tax havens are bad for business are mobilising publicly to end the
abuse.”

Cayman Finance’s letter printed in
US political news publication Politico specifically detailed Cayman’s
compliance with international regulation and transparency standards and pointed
out that the laws cited by the US business group are US laws.

“All Cayman Islands companies are
required to operate on the basis of full tax and anti-money laundering
transparency under Cayman law and under existing treaties with the US and many
other G20 jurisdictions.” Mr. Travers said.

“It need hardly be said that
profits generated in the US by Cayman entities are taxed in the US.”

Falsehoods explained

Explaining the reasoning behind the
Cayman Finance response, Mr. Travers said: 
“These claims promote the falsehood that US companies which rely on
legitimate provisions of the US tax code are in some way engaged in tax
evasion, which is illegal and completely off the table in the Cayman Islands.

“This particular falsehood
completely misses the point that the US is the major recipient of the capital
flows from of the Cayman Islands. That capital provides the liquidity that is
essential to the recuperation and ongoing health of the US economy,” he
added. 

In the letter Mr. Travers further
stated that changing the laws in the US to seek to apply US tax extraterritorially
to Cayman mutual and hedge funds with US-based fund managers will inevitably
lead to those fund managers relocating outside of the United States in search
of competitive returns which are not reduced by additional layers of taxation.

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1 COMMENT

  1. The U.S. is damaging their own economy. They don’t need tax havens help with that. They have handed Wall Street Billions of dollars to throw away and flush down the toilet with lavish parties and expensive cars and condo purchases, with no contingency!
    That’s irresponsible handling of tax payers money. what part of irresponsible do they not understand?

    Who is the US to accuse Tax havens of being responsible for the U.S. own downfall?

    They are reckless, and irresponsible, We are fiscally responsible.
    Would the Cayman Islands be the 4th or 5th largest financial center in the world if we were as stupid as they are in handling finances? I don’t think so!

    They’re just simply jealous and are ashamed that we a little country with a population of only 60,000 people are doing such a fine job of keeping things together.

    We’re the best!

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