Anthony Travers, chairman of the Cayman Islands Financial Services Association (CIFSA) and the Cayman Islands Stock Exchange, has described the suggestion by Chris Bryant,
the Foreign & Commonwealth Office (FCO) minister responsible for the Overseas Territories, that direct taxation must be introduced here as “a seismic shift which has not been thought through and which is not justified on the facts.”
“I have canvassed senior business players in Cayman and they have indicated that at the first sign of a payroll tax they will have to consider their options,” said Mr Travers. “I believe this will inevitably lead to job losses and it will affect both the highly paid and more junior members of staff and lead not to a revenue increase, but a decrease.”
Mr Travers added that London’s financial industry would be hit by any change. “The FCO’s sniping at hedge funds plays right into the hands of EU legislators who are desperately trying to curb the success of the City of London and, in particular, the hedge fund industry. In short, if the FCO attack the Caymans, they damage London. I would have thought in the current financial crisis that would be a horrendous example of unintended consequences.”
Critics of the Cayman Islands and other offshore financial centres argue that so-called “secrecy jurisdictions” were responsible for creating the financial instability that led to the global credit crisis and subsequent economic meltdown.
However, a new report released by the OECD (see separate story) refutes this suggestion and warns the Group of 20 (G20) that it is misdirecting itself in attacking tax havens.
Mr Travers went on to say, “I urge the FCO to acknowledge that the Cayman Islands Government has put forward sensible ideas to cut costs and raise revenue without the introduction of totally unnecessary taxes and allow the Cayman Islands Government to borrow the relatively small amount of money it needs to carry out its business.”
His comments followed recent remarks by leaders in Cayman and Bermuda criticising attempts to portray them as shady tax havens and say world leaders are making them scapegoats for the global downturn.
“It’s not fair,” said Hon. McKeeva Bush, Leader of Government Business and Minister for Financial Services.
“It’s the fault of the onshore centers who taxed their own people ... money is running away from them now,” Mr Bush said.
Bermuda’s finance minister, Paula Cox, also suspects the world’s richest states may be seeking “extra-territorial solutions to their economic, fiscal and financial challenges.”
“There is now a strong suspicion that the G20 has an undisclosed agenda item to drive forward a global corporate tax policy, which may fly in the face of a nation’s sovereign right to set down its own tax policy,” she said.