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Still smartingfrom the slowdown of clients seeking their services for offshorecompanies, some lawyers are saying Government should ...
Repeal The Tax Laws
Accordingto one local attorney who spoke to Cayman Net News on conditionof anonymity, the Cayman Islands will not regain its positionin the world of finance because of the present laws which werepassed back in mid 2002 compelling banks to cooperate with foreignauthorities fishing for tax information on their citizens unless such laws are repealed.
"Cayman is gone," says this attorneywho has been practicing here for over two decades. "Otherjurisdictions such as Jersey in the Channel Islands are tellingtheir own authorities to leave them alone."
On the other hand, Guernsey's Advisory andFinance Committee President, Laurie Morgan, has expressed reliefthat his jurisdiction has not come under the same sort of pressureas Jersey over information exchange on non-resident savings interest.
The Financial Times in London reported lastmonth that UK Paymaster General, Dawn Primarolo had given theJersey authorities an ultimatum on committing to an European Unioninitiative on non-resident savings interest taxation, arguingthat the jurisdiction's 'intransigence' could put the UK's lucrativeinternational bond market at risk, and wreck the project's chancesof success on an EU-wide level.
The Advisory and Finance Committee chiefstressed that although the two Channel Islands have a close relationship,and traditionally work in tandem on issues such as this, bothjurisdictions have conducted separate talks with the UK governmenton the EU initiative. He suggested that perhaps, in this matter,the negotiating tactics employed by Jersey and Guernsey have beendifferent.
Cayman's slowdown of international business,particularly from the United States, the UK and Canada has begunto hurt some of the local law practices and firms providing companymanagement services.
In the meantime, Britain's Chancellor GordonBrown is threatening to apply financial sanctions to Jersey inthe Channel Islands because it is resisting a European Union clampdownon tax havens.
The Chancellor is said to have "lostpatience" with the island because it is refusing to scrapsome of the tax laws that make it attractive to investors.
He wants Jersey to accept the changes inorder to ensure that the EU accepts his proposals for an alternativeto the withholding tax. This deal could benefit the City of London.
Jersey has rejected a Treasury ultimatum.
The European Union decided to stop peopleavoiding tax by getting countries to exchange information aboutnon-resident investments. Senator Frank Walker, the Jersey politicianin charge of treasury matters, said his government was willingto discuss the principle of exchange of information, althoughit wanted to be sure that the same rules would apply to competitorcountries such as Switzerland.
But he said the confrontation with the treasurywas about the EU's code of conduct, an agreement designed to abolish"harmful" tax practices.
The EU is pushing this in parallel withthe rules on exchange of information.
Mr. Walker said the financial services industryon the island, which is responsible for two thirds of the government'srevenue, could not survive in its current form if it agreed tothese demands.
In a recent editorial, London's Daily Telegraphwrote:
"Contrary to the impression GordonBrown likes to give, there are still some far-flung corners ofthese islands where his writ does not run. Jersey, Guernsey andthe Isle of Man are part of neither the United Kingdom nor theEuropean Union. That, however, has not stopped the Treasury fromtelling the world that it has "lost patience" with jersey.The island is refusing to accept the EU's code of conduct on businesstaxation and to agree to exchange information on non-resident'deposit accounts. According to the Treasury, this is putting atrisk the Chancellor's much-vaunted deal to save the City's bondmarket from the threat of an EU withholding tax.
In fact, this fracas has just has much todo with saving Mr. Brown's face in Europe as with safeguardingthe City. If the Chancellor had simply wanted to protect the bondmarket, he could have vetoed the withholding tax proposal outright.But the rest of the EU was obviously given to understand, by theTreasury, that the Channel Islands and the Isle of Man would doas they were told by London. Now they will not, and Mr. Brownis embarrassed.
Like Brussels, Labour hates anomalies suchas the Channel Islands, which insist on retaining their independence.The EU code on business taxation, drawn up under the chairmanshipof the junior treasury minister, Dawn Primarolo, wants to outlawwhat it terms "unfair" tax competition for whichread low tax, which Labour and Brussels both hate. Because Britishministers cannot force Jersey into obedience on this, they aretrying to bully it. But why should it be bullied into sacrificingits interests at the behest of inefficient high-tax countries,when the business it loses will just go to Hong Kong or even nearbySwitzerland?
Unlike the rest of us, Jersey has the rightto tell the Chancellor to get lost. Budget day would be a fineoccasion to use it.