Cayman Islands Urge Tax Havens To Stick Together

Caymannetnews

16 January 2001

This story is reproduced by kind permission of Caymannetnews at http://www.caymannetnews.com

Low tax jurisdictions, commonly referred to as tax havens, continue to do battle with rich industrialised nations represented by the Organisation for Ecomonic Co-operation and Development (OECD), in their quest to eliminate "harmful tax practices."

Through the OECD, they argue that these jurisdictions pursue policies that thwart international tax cheats and which do not offer a level playing field in the global financial market.

Offshore financial centres, many of them in small states - and many of them in the Caribbean including the Cayman Islands-- have found themselves under siege from the OECD, which has been seen as high-anded and dictatorial in its demand for tax havens to comply with its definition of fair tax policies.

At issue is the secrecy that surrounds financial transactions in these low-tax jurisdictions. It is a bugbear to the OECD, fuelling its strident demands for transparency.

Last year, the OECD's approach drew the righteous indignation of tax havens, when it blacklisted some 35 of them and demanded compliance or else face punitive action.

Low tax jurisdictions argue that the OECD's approach threatens their sovereignty and the right to set their own laws and is tantamount to discrimination against small countries which have built their economies on funds coming from people taking advantage of low or no tax centres. Further to that injury, was the insult of lack of consultation by the OECD.

The Cayman Islands has been in the midst of the firestorm with the OECD and its negotiating teams have not only had their forays with that body, but have also had the pressure of taking action on the domestic front, to signal its cooperation.

Local attorney, Michael Alberga (in a presentation at the recent Miami Conference on the Caribbean and Latin America) has argued that the OECD's initiative on harmful tax competition, is, in the main, a ploy to "prohibit capital flow from high tax nations to low or no tax countries, abrogate the rule of law, disregard the rule of national sovereignty and put in place procedures to remove the right to privacy...with threats to use their economic might to bring to heel all of those who do not agree."

It's a view that has found resonance with many of the defenders of the position of low tax jurisdictions, even in member countries of the OECD. Indeed, in the United States, a pressure group, the Center for Freedom and Prosperity/Coalition for Tax Competition has been formed to lobby for maintaining competitive international markets, and against the OECD's policies.

Last week, the battle ground was Barbados, a meeting of "tax havens" and OECD representatives, at which the Cayman Islands was ably represented by Financial Secretary - the Hon. George McCarthy. With continued dialogue, it is becoming clear that discussion, negotiation and accommodation must replace the OECD's dictatorial stance.

Countries like Cayman, which have built successful economies on monies coming from people looking for low tax centres, must fight with everything they have, to preserve their livelihood.

In this light, Cayman Islands may well strengthen its bargaining position by employing international consultants skilled in negotiation and by holding its ground with others countries in a similar position.

For in this fight, size need not be an inhibiting factor. It is known that this little mouse has been known to roar.

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