In a Cabinet press briefing on Thursday, the Leader of Government Business
in the Cayman Islands, Kurt Tibbetts, responded to the recent publication by
the US Government Accountability Office (GAO) of a report looking at why so
many US companies have established entities in the Cayman Islands and other
offshore centres.
The GAO probe centered on Ugland House, home to a legal firm in the Cayman
Islands that has nearly 19,000 registered companies, approximately half of which
are American. The GAO's report on the matter, entitled: 'Cayman Islands: Business
and Tax Advantages Attract US Persons and Enforcement Challenges Exist', was
examined at a Senate Finance Committee hearing on Thursday.
Commenting in the wake of the hearing, Tibbetts explained that:
"As many of you know, the Cayman Islands Government has been in dialogue
with the GAO since August of 2007, regarding a review that the GAO was asked
to undertake by the US Senate Finance Committee of aspects of the Cayman Islands'
financial services sector relative to the US-source business."
"The GAO is an independent, non-partisan agency that works for the US
Congress (Senate and House of Representatives). Its work is done at the request
of US Congressional committees or subcommittees or is mandated by US public
laws or committee reports. The GAO also undertakes research under the authority
of the US comptroller general."
"The GAO has no law enforcement or regulatory powers and therefore, no
access to information at the level of detail afforded under the various international
cooperation channels that exist between the Cayman Islands and the US."
He continued:
"In January 2008, following Cabinet approval and the granting of diplomatic
clearance by the UK Foreign & Commonwealth Office, the GAO met in the Cayman
Islands with representatives from the Cayman Islands Government during the week
of 3 March 2008 in Grand Cayman."
"As we announced then, the itinerary for the GAO's visit to the Cayman
Islands consisted of meetings with senior representatives from the Portfolio
of Finance & Economics, Cayman Islands Monetary Authority, Financial Reporting
Authority, Tax Information Authority, the General Registry and the Portfolio
of Legal Affairs. The GAO also met with Maples & Calder, the tenant of Ugland
House, a building that has been referenced in US congressional debates on US
tax issues."
"The GAO received comprehensive technical briefings and background on
the Cayman Islands legal and regulatory framework as it relates to the operation
of the financial services industry. The GAO team also had parallel in-depth
briefings from Maples & Calder on matters directly concerning the firm and
towards giving the GAO an understanding of the commercial aspects of the Cayman
Islands financial services sector."
And went on to state that:
"We believe that the report generally presents an accurate description
of the Cayman Islands' legal and regulatory regime and also assists in clarifying
the nature of activity that takes place in the Cayman Islands in its role as
a global financial services centre, to the benefit of both US and non-US persons."
"In several respects, we believe the report recognises the stature and
strength of the Cayman Islands' financial services industry. As such, the Cayman
Islands Government welcomes and appreciates the recognition of the institutional
base and regulatory compliance of our financial services sector, as reported
by the GAO team of investigators. Given the government's focus on stability,
quality and integrity of our financial services sector, we were particularly
pleased to see the report's reference to Cayman as a business-friendly, stable
and internationally-compliant jurisdiction and that these reasons are key drivers
for U.S. and global business."
"In addition, we believe the various statements within the report by US
officials from the law enforcement, regulatory and tax areas citing a high degree
of transparency and assistance from Cayman Islands authorities is a validation
of the quality of our international cooperation regime. And lest this point
be misunderstood: the fact is that no jurisdiction can claim credibly to have
100% eliminated criminal activity. It therefore becomes equally if not more
important as to what you can do when you find it - hence the premium we have
put on developing the effective international cooperation channels that the
GAO found when they examined Cayman."
In conclusion, Mr Tibbetts observed that:
"The report also recognizes that tax compliance in relation to US persons
is an obligation of those persons and that tax enforcement challenges in cross-border
situations apply whatever the jurisdiction involved, and are not specific to
the Cayman Islands."
"Another key finding in the report which again reiterates our position
is that registered office services provided by Cayman Islands' firms accord
with the general nature of such services and, in fact, are subject to regulation
not applicable to such services under the governing US state laws."
"Our cooperation with the GAO in this process is an example of the approach
of constructive engagement that we take in cross-border financial services matters.
We recognize that it is no longer sufficient in this day and age to do the right
thing - you have to prove that you are doing so as well."
"The Cayman Islands Government looks forward to continuing to assist various
U.S. agencies in dealing with enforcement challenges referenced in the report,
where we are in a position to do so. As the report recognises, however, the
US Congress and those who are responsible for drafting and enforcing US tax
laws and regulations necessarily must play the principal role in enhancing compliance
with those laws and regulations by US taxpayers."
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