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GRAND CAYMAN, Cayman Islands—Facing a “trade war for financial services,” the Cayman Islands needs to expand its financial services infrastructure to address the issue of “substantial presence” of financial activity taking place there, a leading financial official said Wednesday.
Speaking at the annual Cayman Captive Forum in Grand Cayman, Anthony Travers, chairman of Cayman Finance, the private-sector body representing the Cayman financial services industry, said the Cayman Islands must address negative public relations directed at it by onshore politicians and regulators who allege the domicile is a center of “tax evasion.”
Those attacks are driven largely by misinformation spread on the Internet and promoted largely by “extreme left-wing social activists whom I describe as the Tax Taliban,” Mr. Travers said, and by populist politicians and regulators seeking an “offshore pot of gold.”
While tax evasion is prohibited by Cayman law, “tax avoidance” is lawful, Mr. Travers said. It also is not legitimate to criticize the Cayman Islands because tax deferral isn’t considered “politically correct” in the United States. The answer to that issue, he said, is to amend U.S. tax law.
Still, the Cayman Islands must address the issue of what constitutes a substantial presence on the island or “we’ll clearly be the target of continued attacks,” he said.
More of the financial services infrastructure that supports financial activity in the Cayman Islands must be based there, necessitating a change in Cayman immigration policy to provide financial services professionals coming to the Caymans long-term residency security, Mr. Travers said.
The Group of 20 industrialized nations' recent pledge to clamp down on tax havens and the Organization for Economic Cooperation and Development's list of jurisdictions that have not fully implemented international tax standards likely will have little effect on companies' choice of domicile for their captive, experts say.