US more secretive than Cayman? Say it ain’t so!

“In terms of secrecy, the United States of America has now surpassed the notorious tax haven of the Cayman Islands!”

Such is the damning praise being screamed out in headlines across the globe, following the latest edition of the Tax Justice Network’s “Financial Secrecy Index.”

We would point out that what is deemed “secrecy” by some might well be considered “legitimate privacy” by others — a value we hold high and dear.

Taking a look at the Tax Justice Network’s 2015 index, Cayman is listed as the fifth most secretive jurisdiction, just ahead of Luxembourg, and behind Singapore, the U.S., Hong Kong and Switzerland. (At the bottom of the list of 92 are Slovenia, Dominica, Finland, Cook Islands and Montserrat. … Pray tell us, when comparing financial industries, which cohort would you rather Cayman be lumped with?)

Looking at this somewhat tongue in cheek, even more troubling than Cayman’s drop from fourth place in 2013 to fifth place in 2015 in the overall index – which is heavily weighted toward the size of a jurisdiction’s financial industry, not just how “secretive” the jurisdiction actually is – is Cayman’s raw “secrecy score” of 45th out of 93 … meaning that in regard to actual financial secrecy, Cayman is middle-of-the-road.

The so-called “Cayman Miracle” was based upon the premise of Cayman being a safe harbor for personal privacy and tax competition – indeed, we used to embrace proudly the self-referential term “tax haven,” which, judging by advertisements and articles from our newspaper’s archives, used to be Cayman’s unofficial “national motto.”

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It must be noted, of course, that the Tax Justice Network is the farthest thing from an unbiased source of information. Oriented around (in its own words) “radical and original positions,” the special interest group is dedicated to a variety of goals that, if achieved, would disrupt international finance and destroy offshore financial centers such as, and including, Cayman. The group is, in a word, adversarial.

That doesn’t mean the Tax Justice Network isn’t without its strong points. As evidenced by the recent international media attention, the group is excellent at generating and manipulating news coverage.

It is the effectiveness of the Tax Justice Network, and their kind, that should command our attention in Cayman. As one of our news reporters stated in a story in Wednesday’s Compass: “Not without glee, the organization noted that years ago its suggestions that automatic exchange of tax information, beneficial ownership registries and country-by-country reporting should be implemented globally were ridiculed. Yet today all three initiatives are endorsed by the G20 and automatic exchange of information is going to be rolled out worldwide from 2017.”

Beset by intense pressure from activists such as the Tax Justice Network, competitor jurisdictions and tax-greedy governments, the old ideals of “no tax” and “no questions asked” are most likely lost to the winds of history. Nevertheless, it behooves our leaders, when making promises to officials from the U.K. and Europe on things such as beneficial ownership registries, to proceed with caution, and to follow the example of Switzerland and Hong Kong, rather than the OECD and their like.

We’d much rather have Cayman appearing at or near the top of any “most notorious” list launched by anti-offshore activists, than to drop off the world’s economic radar entirely. In fact, we’d wear such an appellation as a badge of honor.

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  1. Why is it any surprise that the USA is more secretive than the Cayman Islands?

    FATCA is supposed to be a tax information EXCHANGE system. USA banks are supposed to provide the same reporting to non-USA tax authorities that the USA requires is provided by non-USA banks around the world.

    Non-USA banks have been terrified by draconian penalties into closing the bank accounts of legitimate American clients around the world. For example Americans who have lived in Paris for 30 years.

    Meanwhile any foreigner can walk into a USA bank and in minutes open a checking and interest bearing deposit account. The interest paid on that deposit account is USA tax free as a matter of law.

    But surely the interest is taxable in their home country. Does the USA bank file a report with their clients home country? Of course not. They collect a W8 form and forget about it.

    And this is the USA as a whole. Nevada and Delaware specialize in the hiding of assets and income. They are literal black holes of information.

    Where is Obama’s outrage against this?

    Please stand firm against those governments who demand private information from these islands while their own countries’ systems are shrouded in secrecy.

  2. Well the entire middle part of your argument is wrong. US non resident aliens (or what you call foreigner) are subject to an automatic 30 percent withholding on all investment/passive income which includes interest, dividends, rents, etc. This includes both individuals and entities. And the US has entered into many tax treaties and sharing arrangements with other nations. If the individual in question owes tax in their home country (not likely as the US is one of the only countries to tax worldwide income) then surely they would disclose the US tax paid to get a deduction so the secrecy problem is solved.

    As to the US ranking on secrecy, it has more to do with corporate ownership secrecy than tax secrecy.

    Anyway might want to try getting your facts straight.