Cayman Islands tax haven faces taxes

News

Friday, 04 September 2009 08:05

The supposed super-wealthy Cayman Islands tax haven, the world’s biggest hedge-fund venue and fifth-biggest bank centre, is facing bankruptcy. Despite being the home of an estimated $2.3 trillion (£1.4 trillion) in hedge funds and ranking in 12th position of the islands in the world’s richest jurisdictions list, the government of the Caymans Islands is unable to pay its own staff and may have to introduce taxes.

The situation has arisen as a consequence of the global financial crisis. The island’s status as a tax haven has aroused controversy – Barack Obama was fiercely critical in his presidential campaign, and in April this year the OECD firmly places the jurisdiction in its ‘grey list’ i.e. areas of dubious financial propriety.
Like most islands in the Caribbean, the Caymans have a deep economical and social divide. William McKeeva Bush, the leader of government business on the islands, had approached the British government, which has ultimate responsibility for the jurisdiction, with an appeal for a loan from banks of $310m (£190m).

Bush received short shrift from Chris Bryant, a junior Foreign Office Minister. ‘I fear you will have no choice but to consider new taxes, perhaps payroll and property taxes,’ was Bryant’s robust response. ‘I understand, of course, that you will want to consider carefully the implications for Caymans’ economy, including the financial services industry.’

Editor’s comment: Bryant’s sarcasm leaps off the page, but I think he’s got a good point here. Why the hell should the British taxpayer bale out one of the wealthiest jurisdictions in the world? A simple, straightforward tax on payroll and property would easily resolve the problem. Of course, that solution would not go down too well with the multi-millionaires sunning themselves on the white sands of Seven Mile Beach on Grand Cayman.