Mixed Brexit impact on the Overseas Territories

The Cayman Islands has “seen the best and worst” since Brexit with the European Union tax blacklisting of Cayman and strong ongoing support from the UK government during the coronavirus pandemic, according Eric Bush, chief officer in the Ministry of International Trade, Aviation and Maritime Affairs.

Speaking on Friday at a Caribbean Council webinar on “What does Brexit mean for trade and development in the UK Overseas Territories?”, Bush said he believes the UK is strengthening its position in the world and that will bring the UK and the Overseas Territories closer together.

In Cayman, he said, “We have seen a strengthening of the relationship, even prior to Brexit.”

But the UK’s exit from the European Union had both positive and negative effects.

Bush said the EU’s “unjustified” tax blacklisting of Cayman in February 2020 “was the absolute worst”.

Although Cayman was removed from the list of uncooperative jurisdictions in tax matters eight months later, a European Parliament resolution passed earlier this year has called for a change in the blacklist criteria to specifically target zero-tax jurisdictions like the Cayman Islands.

Bush said the best, in turn, came in the form of the UK supporting Cayman with medical expertise, expert guidance on how to fight the pandemic and ultimately by supplying the Pfizer-BioNTech vaccine.

In addition, the UK partnership, and specifically the Governor’s Office, helped maintain an airbridge between Cayman and the rest of the world through British Airways flights to London.

Now that the UK’s resources are no longer focussed on the exit from the EU, there is an opportunity for the UK, Bush said, “to really harness the individual and collective strengths of each overseas territory as a part of the British family and truly become a strength for good in the world”.

Chris Duggan, vice president of business development at Dart Real Estate, described the Brexit impact as neutral, given that the Overseas Territories were never part of the EU and there was no Cayman exit from any EU arrangements. The Overseas Territories, likewise, never enjoyed the benefits of EU membership in terms of the free movement of goods, services and people.

As a result, he said, there was no fundamental change.

Duggan said British influence in the EU has been waning for years, which meant that even before Brexit, it did not have the standing to advocate on behalf of the Cayman Islands as it had done in the past.

However, this is even more the case today.

“To the extent that Brexit will cause increased scrutiny of of tax neutral jurisdictions – whether it will or whether it won’t remains to be seen – but to the extent that it does, it is obviously going to continue to put a lot of pressure on the British Overseas Territories,” Duggan said.

For the financial services industry, Duggan noted, the recent move by Morgan Stanley to shift business presence from London to Frankfurt was a redrawing of the lines to the detriment of the UK.

With more high-profile moves likely to follow, the UK would be forced to look elsewhere.

“I think as a result of that, the financial services nexus between the UK and the Cayman Islands will actually benefit and therefore ties will be strengthened,” Duggan said.

Speaking about his own organisation, he added that Brexit has had no impact on investment decisions.

“I certainly don’t see the Brexit impacting Ken [Dart]’s commitment to the Cayman Islands and by extension, other like-minded individuals, families, family offices and investors that are looking to invest in in the Cayman Islands; or, to be honest, any other British Overseas Territory,” he said. “I don’t see Brexit materially impacting their decisions in any way, shape or form at all.”

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