By Mario Rankin

Based on recent news reports it appears the Cayman Islands has officially become one of several countries upon whom the UK is forcibly exerting its will for its own benefit. This time there are no grand claims of government corruption, a la the Turks & Caicos Islands, but an arguably more despicable unspoken agenda. That agenda being to adversely impact the economy of the Cayman Islands using their newfound leverage of having the final say over government borrowings.

These are unprecedented adverse economic times globally by all accounts, not since the Great Depression have so many been so badly affected. What is not unprecedented are countries borrowing capital to keep their economies going until a recovery is made, and the UK is squarely included in this category. It is chiefly this reason, among others, that the UK’s hypocrisy is abhorrently transparent under the ridiculous guise of being concerned for Cayman’s future.

As each day passes it is obvious nothing is further from the truth, they are clearly concerned with their own future and handicapping the more tax- and business-attractive jurisdictions for UK citizens, investors and corporations as ever increasing UK taxation continues to climb.

So what are the options? If we are truly broke and without other recourse to raise capital, then conventional wisdom says you have two: either go independent or bow to the UK’s bidding by enacting direct taxation. Both options risk hurting, potentially destroying Cayman’s economy. The latter will almost certainly destroy it given our economy has been entirely built upon its advantage of indirect taxation for decades. Going independent comes with its own risks but it is arguable that Cayman has the reputation, framework, expertise, experience and infrastructure to succeed where others have failed.

There is a third option, however. If no permission is granted, then call the UK’s bluff, while creating an alliance with other dependent territories and using the international press to highlight the hypocrisy and self interest of the mother country. This means that if the UK does not approve the Cayman Islands borrowing private funds from willing lenders then the leadership should go out and borrow the money anyway, despite the legal provisions not to do so.

While the most confrontational option, it is by far the lesser evil for the people of these Islands. The Caymans are doing nothing that the UK, US and almost every other country are not already doing. Anguilla, who is in a similar fight with the UK, has told them directly that if they do not get approval to borrow funds they will borrow them anyway and let the UK decide what to do thereafter! Cayman should follow and in fact lead such a charge, while creating a strong alliance with the other jurisdictions under the same kinds of pressure.

There is no way the UK will forcibly retaliate against the Cayman Islands, Anguilla and other territories in financial desperation for simply doing what is in the best interest of the Islands, while not borrowing a single dime from UK taxpayers. The UK’s recourse will be grossly limited if Cayman does a good job at framing the issue in the global media that Cayman is doing what’s best for its people, what is commonly accepted and prudent action used by governments all over the world (including the UK) and that the UK is using its leverage not for the good governance of the Cayman Islands and its other dependent territories but for their own economic self interest.

The fact that the UK government still considers Cayman a “tax haven” that cannot support itself through indirect taxation speaks to how out of touch they are with the Cayman Islands on many levels. Not only are we no longer a “tax haven” but a transparent cooperative world class financial jurisdiction; indirect taxation has been historically very successful for many countries around the world, Cayman included.

It is therefore completely without basis that an unprecedented global recession greatly affecting small economies, caused by the gross mismanagement by larger economies, should be criticised for what is clearly guesswork at best and excuses at worst by the UK.

Will this lead to a Turks and Caicos type takeover or forced independence?

The first is virtually unfathomable, they will never risk the world watching them forcibly punish another country simply because they couldn’t force that country to directly tax its own people. The latter will likely be the threat used, our response should be a resounding no and heavy negotiations can ensue on how to resolve the issue thereafter but at least the Cayman Islands has the money to operate at that point.

We must be certain to levy our criticism at the UK itself all the way to Gordon Brown and not merely to the FCO. It becomes political suicide for the Gordon Brown government, which is already wildly unpopular and on the verge of losing their power in the UK, to do anything but resolve the matter amicably. More bad press, this time on their “new colonialism” not to mention breaking an age’s old tax free promise from King George himself, would simply be yet another nail in their political coffin otherwise. This would likely put pressure from above on the FCO, while also allowing Cayman and others to make important alliances with the UK opposition, who will benefit from the removal of the Brown government.

If the Cayman Islands Government is as broke as they say and if the UK won’t sign off without direct taxation, then there really are no “good” options. All options come with great risks, the third option, however, is the only one that gives Cayman and our allied territories a fighting chance to maintain our historical position and move forward in a direction the people of these Islands support.

The other options will amount to economic suicide for the jurisdiction and political suicide for the UDP. No matter how it is framed to be the fault of the PPM, which by large measure it is, the UDP and McKeeva Bush will forever be known in history as the people who gave the Cayman Islands “taxes” and destroyed its historical recipe for economic success. History books may be the only place future Caymanians can reference that these Islands were once a prosperous economic world player.

If hard, future-changing, decisions must be made, then do so by taking a stand against the larger more powerful hypocrites in the motherland. History and the people of these Islands will remember any action where we stood up and fought for what was just with pride and respect regardless of the outcome.

Though the current government has indeed been dealt a bad hand from previous administrations, I hope the powers that be have the courage not to lie down and roll over on an issue that could potentially destroy this country and forever alter the course of its history and prosperity. If the previous governments care about this country they too will do everything they can to stand unified with the current government to illustrate a fully unified front on this course of action, or they can take the coward’s way out and place the blame on the UDP for their own political advantage. UDP should be seen to extend the olive branch in this regard for the greater good; there is nothing to lose politically by doing so as it does not exonerate their prior actions in any way.

Direct taxation is forced taxation, you have to be willing to take away a person’s freedom to enforce removing them from their money; that’s not what Cayman wants nor has ever believed in and it has served us extremely well. When you give governments the power to directly tax, it’s an unbelievably slippery slope; successive governments will inevitably increase the rates for their own political purposes at the expense of its people. Class warfare and a host of other problems inevitably ensue. Do not go down this road, it may seem small to some if the percentage initially enacted is small, the long term ramifications will not be.