US Tax EvasionCrackdown: Cayman Companies Targeted
Last Friday, the BBC reported that Californiahas created a blacklist of US companies who have moved their officialaddresses from the US to offshore havens like Bermuda and theCayman Islands but maintain physical operations in the US to avoidpaying taxes.
According to the California State Treasurer'soffice, a list of 23 companies in which the state will no longerdo business with or invest in has been made public. Among thoseare Accenture, Tyco International, and Ingersoll-Rand. Not onlywill the state no longer do business with these companies butalso two massive California public pension funds have been calledon to pull $750 million (US) of investments in them as well.
"Corporations hiding behind a mailboxin Bermuda are shirking their duty as Americans, and underminingconfidence in the financial system," said Philip Angelides,the California state Treasurer. "Moving offshore also makesit more difficult for shareholders to keep tabs on the companythey own, and more difficult to sue if necessary."
According to California, who equates theoffshore migration to the accounting swindles of Enron and WorldCom,such actions have shaken the financial marketplace and cost families,pensioners and taxpayers billions of dollars. And other statesare jumping on board. Though some Republicans support privatesector decisions to move offshore, there are some officials likeRepresentative Jim Maloney in Connecticut who call what companiesare doing "unpatriotic."
With this movement towards countries suchas the US attempting to pass laws that ensure US money is spenton US needs, this could be the time for the Cayman Governmentto take the same route.
Instead of taking pension plans in the tensof thousands and investing in overseas companies, Cayman moneyearned by Cayman residents should be invested in Cayman interests.Now is the time to take a significant portion of the money collectedfrom employees by law and invest it locally instead of overseas.
There are many capital projects that governmentwould like to undertake but they cry poor mouth and blame thelack of funds to bring such projects to fruition. Furthermore,the Government's failed attempts to raise money for a bond issueby the government could be replaced by allowing the pension fundand even some insurance providers to purchase Cayman Island Governmentbonds.
Beyond the money that is currently in investmentcirculation, utility companies and banks that have seen a dropin revenue but still boast a substantial year-end purse couldbe persuaded to buy Government bonds and invest back into thecommunity.