Cayman Finance Hits Back at Group Claiming Low Tax Jurisdictions Hurt U.S. Economy

Cayman Finance "Open Letter to Senator Levin" Details Falsehoods

GEORGE TOWN, Cayman Islands, Aug. 4 /PRNewswire-USNewswire/ -- The financial services industry in the Cayman Islands rejects false claims by a U.S. business group, "Business and Investors against Tax Haven Abuse."  That U.S. business group recently claimed that low or no-tax jurisdictions hurt the U.S. economy because they encourage tax evasion. "The deliberate misrepresentation of lawful tax structuring as illegal tax evasion should be a source of real concern to the U.S. Congress and the public it represents," Cayman Finance chairman Anthony Travers said.

The U.S. business group is endorsed by Senator Carl Levin (D-MI).  Sen. Levin was a co-author (along with then-Sen. Barack Obama) of the "Stop Tax Haven Abuse" bill, which was supplanted by disclosure legislation in what became the Hiring Incentives to Restore Employment ("HIRE") Act. "This mischaracterisation is not only grossly misleading in describing the proper function of the offshore financial centre and the benefits it confers on the United States, but forms a wholly unsound basis on which to formulate United States tax policy," Travers said.

The Cayman Finance response, addressed to Senator Levin and printed as an 'open letter' in Washington, D.C. newspaper Politico, details Cayman's impressive compliance with international regulation and transparency legislation and spells out Cayman's full income tax transparency agreement with the United States. The International Monetary Fund and the Financial Action Task Force reports demonstrate that Cayman's all crimes anti-money laundering regime is amongst the very best in the world; Cayman's IOSCO membership ensures proactive regulator-to-regulator disclosure.

Chairman Travers explained the reasoning behind the Cayman Finance response:  "These claims promote the falsehood that U.S. companies which rely on legitimate provisions of the U.S. tax code are in some way engaged in tax evasion, which is illegal and completely off the table in the Cayman Islands. This particular falsehood completely misses the point that the U.S. is the major recipient of the capital flows from of the Cayman Islands. That capital provides the liquidity that is essential to the recuperation and ongoing health of the US economy."  

"The laws cited by the U.S. business group are U.S. laws, and that all Cayman Islands companies are required to operate on the basis of full tax and anti-money laundering transparency under Cayman law and under existing treaties with the U.S. and many other G20 jurisdictions," Travers said. "It need hardly be said that profits generated in the U.S. by Cayman entities are taxed in the U.S.," added Travers.

The claim that low or no-tax jurisdictions hurt the U.S. economy through tax evasion does not take into account the tax transparency treaties that are in place - nor does it reflect the growing body of academic reports that suggest that international financial centres such as Cayman are well-regulated, neutral jurisdictions that facilitate cross-border business.  The Cayman Islands provides liquidity to markets around the globe by increasing investment into developed nations such as the United States as well as into developing economies, where project financing is desperately needed to fuel job creation and alleviate poverty.  

The open letter in Politico points out that changing the laws in the U.S. to seek to apply U.S. tax extraterritorially to Cayman mutual and hedge funds with U.S.-based fund managers will inevitably lead to those fund managers relocating outside of the United States in search of competitive returns which are not reduced by additional layers of taxation.

Cayman Finance is the private-sector association that is the voice of the financial services industry in Cayman, engaging in public relations, public affairs and promotion of the Cayman Islands financial services industry.  To read the complete open letter, or for more information on Cayman Finance, visit www.caymanfinance.ky.  

SOURCE Cayman Finance