As lawmakers in the United States gear up to debate President Donald Trump’s proposed overhaul to the country’s federal tax system, government has hired a multinational law firm to advocate for the Cayman financial sector in Washington D.C.
According to filings with the U.S. Justice Department, the Cayman Islands government hired the firm Baker Botts for $12,500 per month plus expenses. The monthly fee will commence on Jan. 1.
Baker Botts was also hired at an hourly rate of $950 “for handling and message preparation, including education and policy documents, and one series of meetings in Washington in September or October 2017,” states a letter from Baker Botts partner Jeff Munk to the Ministry of Financial Services.
Department of Financial Services Senior Legislative Policy Advisor André Ebanks and Policy Officer Wilbur Welcome had meetings with several senators and congressmen on Sept. 25-26 in Washington, D.C., and their message that Cayman is a well-regulated financial center was “well received,” according to a press release Tuesday from Ministry of Financial Services Head of Communications spokeswoman Angela Piercy.
Filings also show that Mr. Munk has circulated a three-page document touting the fact that Cayman is a tax-neutral jurisdiction, that it has information exchange agreements with 112 other jurisdictions, and that it plays an important role in the global economy.
“Cayman hopes that in the debate over U.S. tax reform in Congress, this point is acknowledged without unnecessary criticism of Cayman, and legitimate international business transactions undertaken there, by U.S. persons and others,” the letter states.
One aspect of Mr. Trump’s plan that could have a significant impact on Cayman and other offshore centers is a proposal to implement a reduced global tax on foreign profits of U.S. multinational corporations. Corporations currently do not pay taxes on their foreign profits until those profits are repatriated to the U.S.
Other aspects of the plan include slashing the corporate tax rate from 35 percent to 20 percent, eliminating some deductions in the federal tax code, and offering a one-time reduced repatriation rate for corporations.
In response to Cayman Compass inquiries, the Ministry of Financial Services stated disputed an Oct. 13 article from Politico, which reported that government hired Baker Botts to lobby Congress. Ms. Piercy stated in an email that the firm was hired to assist “us with engagement to develop mutual understanding between Cayman and key audiences about our respective regimes on tax transparency.”
“In fact,” Ms. Piercy wrote, “the Ministry’s representatives specifically told U.S. officials that Cayman had no lobby-type ‘ask,’ but that our goal was to provide them with facts about our regulatory and tax transparency regimes which, among other things, would help them to assess the accuracy of any commentary about Cayman.”
Mr. Munk reportedly spoke to Politico, telling the U.S. politics and government news publication that Cayman’s goal is to dispel the stereotypes surrounding its role as an offshore financial center.
“From Cayman’s perspective, they want to dispel the stereotypes that are outdated and don’t recognize Cayman’s strong record of compliance,” he said, according to Politico. “I think the policy outcome is less important to them – the U.S. can write its own [tax] code – than avoiding being unfairly criticized.”
Mr. Munk also spoke on the fact that the Baker Botts monthly fees do not start until January, despite the fact that the Trump administration hopes to have tax reform passed by the end of the year.
According to Baker Botts’ website, Mr. Munk has served as legislative counsel to a U.S. senator, as a law clerk for the U.S. Tax Court, and as counsel to a presidential election campaign.
He also made a presentation to the Cayman Islands Law Society in January on how the Trump administration is likely to address tax policies and anti-money laundering rules, according to the law society’s website.