Premier Alden McLaughlin has “no difficulty” complying with international financial reporting standards, even if those standards require the Cayman Islands to make public its register of beneficial ownership of companies and investment funds.
Mr. McLaughlin’s statement was made during a broadcast interview on the BBC’s “HARDtalk” program taped last week, but which aired Tuesday and Wednesday in the Cayman Islands.
“As the premier of the Cayman Islands, I have no difficulty, and my government has absolutely no difficulty, in complying with what are international standards,” Mr. McLaughlin told “HARDtalk” host Stephen Sackur. “If the international standards are that there ought to be a public registry for these matters, the Cayman Islands is more than willing to comply.”
Mr. Sackur responded by questioning Mr. McLaughlin further regarding the effect of such a move.
“You’re saying that you won’t be an early mover,” Mr. Sackur said. “Are you really worried that you’re about to lose the essence of what has made the Caymans successful as a financial center?”
Premier McLaughlin said he was worried about nothing of the sort, despite statements from former Cayman Islands Monetary Authority Chairman Tim Ridley that indicated a public registry of beneficial ownership would make Cayman less competitive with other jurisdictions.
“As we have become more transparent … our business has improved,” Mr. McLaughlin said. “Legitimate business wants to be in jurisdictions that are well regulated and transparent.”
The Cayman Islands government is in the midst of a public consultation on beneficial ownership requirements, specifically asking whether the islands should introduce a public register of beneficial owners of Cayman registered entities.
Late last year, British Prime Minister David Cameron announced plans to create a publicly accessible central registry of information on beneficial ownership in the U.K. and called on other countries to follow suit. Mr. Cameron said making the centralized repository of beneficial ownership publicly available would have benefits for businesses and developing countries, “who will have easy access to all this data, without submitting endless requests for each line of inquiry.”
The U.K. has said it would be up to each overseas territory to decide about following suit on the beneficial ownership registry.
Mr. Sackur pressed Mr. McLaughlin during the program about whether Cayman would follow Mr. Cameron’s direction.
“So you’re now committing, are you, on this program, to absolute revelation of all these so-called beneficial owners of assets in Cayman?” Mr. Sackur asked. “So, however complicated the discretionary trusts or the investment vehicles that we see in your territory, from now on you are going to ensure the beneficial owners, the people who really own those assets, are identified?”
Mr. McLaughlin replied: “Mr. Sackur … we have had legislation in place requiring that records of beneficial ownership with respect to all the corporate entities in the Cayman Islands is kept for 10 years.”
“Yes, but is it published?” Mr. Sackur asked.
“I don’t know of any country in the world where that’s possible,” Mr. McLaughlin said.
“It’s precisely what David Cameron is demanding now,” the “HARDtalk” host replied. “He says, ‘Look, we’re moving in that direction in the U.K., we are going to identify the beneficial owners of discretionary trusts, the Cayman Islands must do the same.’ Will you?”
“Our house is in significantly better order than the U.K.’s with respect to beneficial ownership,” Mr. McLaughlin said. “We’ve had the legislation in place requiring that [beneficial ownership] records be kept for 10 years, the City of London cannot say that.” “We are in dialogue with the U.K. about the move to a public registry,” the premier added.
The tax haven debate
The inevitable accusations concerning Cayman’s “tax haven” status were bandied about by the BBC show host during Mr. McLaughlin’s approximately 24-minute interview.
“You say ‘we’re not a tax haven,’ patently, you are a tax haven,” Mr. Sackur said. “Why do you think so many of the biggest corporations in the world including, just at random, Bank of America and Finance and in the digital world, a company like Facebook, why do you think they have such a focus on their Cayman Islands operation? It is still to this very day because they can minimize the global tax they pay by creating complex financial vehicles based on your territory, and I’d just like a clear answer to this, do you think that is ethically right or wrong?”
The premier responded, “It is not ethically right for any company or an individual not to pay tax that is owed in the jurisdiction in which they live or operate. And Cayman is not designed for that purpose.”
“Well, it is, it clearly is,” Mr. Sackur said.
“It isn’t,” Mr. McLaughlin said. “I think one of the things that’s been missing from the dialogue is an appreciation that the Cayman Islands has never had any form of direct taxation. This is not something that we went out and created. We have never had any form of direct taxation, so the benefit to business In Cayman is we are what are called a tax-neutral jurisdiction. We add no new layer of tax. But any tax … for which liability is incurred in the home jurisdiction is payable in that jurisdiction.”