Up Front
The chances of the CaymanIslands' financial sector being further fractured may have plummeted,as the ...
US Vetoes EU's Tax
In a move that is in Cayman's best interest,United States President George Bush's administration has rejectedany participation in the European Union's (EU) Savings Tax Directive.
The Freedom and Prosperity Foundation, aWashington-based non-profit educational institution dedicatedto economic issues, reported that one highly placed White Houseofficial relayed that, "We are not signing the European Union'ssavings tax directive. There is ZERO support in the Administrationfor signing."
This could serve to be a fatal blow to theEU's 2 year initiative to get 21 countries, 15 within the EU andsix from outside (including the US), to comply with a mandatethat would require financial institutions in low-tax nations toreport private financial information about nonresident investorsso high-tax nations could tax income earned in other jurisdictions.
However, the US's decision to veto the taxinitiative works in Cayman's favour.
Great Britain's suggestion that the EU financeministers are automatically notified of every interest paymentmade to any EU citizen within the EU to their home revenue authoritycould ensure definitive long-term damage not only to the privacyof account holders in the Cayman Islands but also on the country'sstatus as a tax-free business haven in general.
As a result, the Cayman Island's fiscalsovereignty has been placed in the crosshairs. This so calledSavings Tax Directive could drive hundreds of millions of dollarsfrom the Cayman economy.
According to Andrew F. Quinlan, Presidentof the Washington DC-based Center for Freedom and Prosperity,the organization has dedicated the past two years to lobbyingefforts against tax cartels. Quinlan called the Bush Administration'sdecision, "a victory for tax competition, financial privacyand fiscal sovereignty."
Lobbyists said the EU tax initiative wouldhave undermined the US's competitive advantage in the global economyand weakened already struggling US Financial markets. With theUS's rejection of the EU's initiative, political analysts in theUS are hoping that high-tax nations will choose to lower tax ratesand reform anti-growth tax codes as a way to increase growth andavoid tax evasion.
As forecasted by the US, this tax cartelwould have a terrible effect on the Cayman economy. Internationaltax harmonization schemes will undermine the Cayman's competitiveadvantage.
If the EU wins, the Cayman economy willlose savings and investment because the British government willget the power to tax income earned in the Caymans.
The Cayman economy would suffer at a timewhen it needs foreign capital the most. At a minimum, the EU taxinitiative would drive millions of dollars out of the country.That translates into fewer jobs and lower incomes for residentsof the Cayman Islands.
With the US's recent decision to turn downthe EU's tax directive, the EU's chances of succeeding have plummeted.
Meanwhile, Cayman Net News has learned thatthe Leader of Government Business, the Hon. McKeeva Bush refusedto sign the proffered agreement presented to the Cayman NegotiatingTeam by the Hon. Dawn Primarolo, the UK Government's PaymasterGeneral when they visited London in May.
However, it is understood that talks arestill ongoing.