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 compliance.

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.

Sincerely,

Anthony Travers, OBE

Chairman, Cayman Islands Financial Services Association