The following is an open letter to President Obama from the Cayman Islands Financial Services Association:
May 5, 2009
The Honorable Barack Obama
The White House;1600 Pennsylvania Avenue;Washington, DC 20500
Dear President Obama:
We are pleased with your announcement that the United States
intends to restore balance and fairness to its global tax policy. We
agree with your focus on preventing tax fraud and evasion; ensuring
that every corporation pays its fair and lawful share is important. We
stand with you in favoring effective prevention of tax fraud and
evasion and maximum transparency between tax jurisdictions, including
the Cayman Islands.
We are, however, gravely concerned about your remarks regarding the Cayman Islands,
which erroneously suggest that the subsidiaries of U.S. corporations
operating in Cayman are engaging in tax fraud merely because they are
registered to do business here. Nothing could be further from the truth.
We believe that Cayman-based corporate subsidiaries operate legally
and transparently and are aware of no information to the contrary. The Cayman Islands has a low tax rate, just as do Ireland
and other jurisdictions. That is not a bad thing; it certainly is not
the basis upon which to suggest illegality in the form of tax evasion.
Tax deferral arises, as you know, from current provisions of U.S.
tax law that were designed to provide a competitive advantage to
American companies in global trade. But this is not fraud, evasion or
artificial avoidance. Historically, deferral has been used by some U.S.
companies to boost the capital they have available for reinvestment,
expansion and job creation. We fully recognize that the issue of tax
deferral is a matter for the U.S. Government to determine, and we state
no view on that subject.
We do feel compelled to note that, for over 20 years, the Cayman Islands has been a model of cooperation with the United States and, indeed, the world. We have worked cooperatively on every international initiative from the United States,
the IMF, the OECD and the FATF to create a financial regulatory
structure that is robust, accountable, transparent and fair. We take
our obligations in this regard very seriously. Notably, there has not
been a single bank failure in the Cayman Islands
during this financial crisis and none of the financial recklessness
that has brought about much of the current global crisis occurred in or
involved the Cayman Islands. Rather, to the contrary, the investments which flow from the 12,000 companies involved with the United States
have provided trillions of dollars of international investment to U.S.
financial institutions at a critical period, and have done so in a
fully transparent manner.
Specifically, since 2005, the Cayman Islands
has had a fully informative tax information exchange arrangement under
the European Union Savings Directive (EUSD) with all 27 European
countries. In 1990, Cayman entered into a fully transparent all crimes
Mutual Legal Assistance Treaty with the U.S. and, in 2001, a
comprehensive U.S. Tax Information Exchange Agreement. We are actively
pursuing additional information sharing agreements with additional
jurisdictions. We are eager to work with your Administration to take
further steps as necessary to promote transparency and tax law
Moving forward, we hope you will provide us the opportunity to
provide you and your Administration a fuller description of the efforts
the Cayman financial industry has taken to promote transparency and
accountability. We are confident that this will enable you to share our
conclusion that U.S. citizens do not use the Cayman Islands to evade tax.
Mr. President, we share your concern that the global financial
markets work transparently, safely and to the benefit of all
participants. We look forward, as we always have, to working with you
toward this goal.
Anthony Travers, OBE
Chairman, Cayman Islands Financial Services Association