Cayman’s exclusion from the latest European Union tax blacklist gives little cause for celebration, coming as it does with significant strings attached.
As the Compass reported this week, the EU has once again inserted itself into Cayman’s affairs, directing our political leaders to amend newly minted economic substance legislation under “further technical guidance” – or risk being blacklisted, after all.
It seems they are not satisfied with the economic substance law our Legislative Assembly rushed to draft and approve late last year, again to meet EU demands. They appear particularly concerned that investment funds are exempt from economic substance requirements.
It bears repeating that the idea of establishing “adequate” presence for a company that conducts business digitally or internationally borders on nonsense. It is difficult to see the EU’s position as anything but an affront.
We are not children, to be threatened with punishment for not following a benevolent parent’s orders. Nor are we the rogue actors that self-declared “fair-tax” crusaders try to make us out to be. Cayman has endured as one of the world’s leaders in global finance precisely because of our responsiveness to global standards, our political stability, integrity and collective expertise.
We fear the outcome if Cayman continues to allow our delicately balanced system to be hacked at by foreign bureaucrats who are assaulting our economy with increasing frequency and under the guise of a variety of concerns (economic substance, public beneficial ownership registries, and corporate tax rates, as The Netherlands has done).
Just as this editorial board wrote regarding U.K. Parliament’s ongoing attempts to meddle with our financial services framework, “achieving a proper and profitable regulatory balance is our business, in every sense of the word.”
Government has decided that the right course of action is to continue working to address the EU’s concerns to avoid blacklisting and potential future sanctions. We hope that Cayman’s designated representatives, led by Premier Alden McLaughlin and Financial Services Minister Tara Rivers, do not forget that the experts on these issues are not to be found in the halls of Berlaymont office building in Brussels, but back here in Cayman.
Our thriving financial services sector, the lifeblood of our economy, did not come about by accident. It was not given to us but made: carefully planned and nurtured over decades by government and private industry leaders with deep subject matter expertise and significant skin in the game.
For decades, the close working relationship between government and financial services experts has been instrumental to our success. It has enabled us to stay on the cutting edge of a fast-moving industry while adapting to shifting political headwinds. Its importance cannot be overstated or ignored.