Stuart Jack

Tax havens and economic stability

Please read FCO Minister’s comments in the Guardian 

The Minister responsible for the Overseas Territories in the British Government, Chris Bryant, has today written a piece in the Guardian on line, which should be of particular interest to people in Cayman (http://www.guardian.co.uk/commentisfree/2009/sep/25/british-overseas-territories-tax-havens). The Minister praises the efforts of OT offshore centres to comply with international tax standards. He notes that the Cayman Islands have been elected to the OECD steering group dealing with these matters. He writes: "These are countries committed to meeting internationally recognised finance standards and taking on increasing responsibility for oversight of international financial regulation, and well on the way to throwing off the "tax haven" label".

Chris Bryant also expresses sympathy for the economic difficulties that the OTs are facing and talks of the need to weigh up the understandable wish to stimulate economic activity with the ability to service a much higher debt burden. Referring specifically to Cayman and Anguilla he calls for strategies to rein in public expenditure and/or raise revenue.

…and try to understand the UK’s thinking

These comments by the Minister – which I would encourage people to read in full – give lie to the suspicions sometimes expressed in Cayman (for example again on this morning’s talk show) that the British Government is trying to destroy Cayman’s financial services industry by demanding new taxes. I have myself on the talk show called this conspiracy theory “rubbish”, a strong word for a mildly spoken governor.

The reason Chris Bryant is calling for a broadening of the government’s revenue base is to ensure that borrowing (which in practice might include PFI-type deals) can be paid back and that government revenue is better able to deal with future shocks and a changing world (including in the financial services industry). As evidenced in other OTs like Bermuda some form of direct taxation does not prevent a country from being a successful offshore centre. At the same time the UK is calling for the OTs to keep up with evolving international tax and regulatory standards, as Cayman indeed says it is determined to do.

Cayman must think about the future and be prepared to change 

For Cayman to remain both prosperous and a pleasant place to live it needs to adapt to changing circumstances. That goes for the way government operates and funds itself. Change is often painful but necessary. As a recent editorial in the Cayman Compass argued, the pain should be distributed as widely and fairly as possible and not just on one or two industries or sections of the community. The civil service cannot be immune, for example.

It is for a country’s elected leaders to point the way and take difficult decisions based on careful consideration of the policy options and a long term vision. As the Leader of Government Business, McKeeva Bush, revealed on the talk show this morning, the Cabinet in Cayman has decided to draw up a national plan that will encompass the economy, social issues and the environment. I have advocated for some time such a long term plan or “sustainable development strategy”. We never quite got there during the last 3 years; hopefully we now will.

Posted at 19:47 25 September 2009 by Stuart Jack  |  Comments[2]