Thursday, June 7, 2012

“No Income Tax in Cayman”

As we know, who live here, Cayman has a relatively high international profile. Among Offshore tax-havens we are certainly in the top ten most-recognised, and in some categories in the top five. Financial scandals keep our name alive everywhere – in newspapers, novels and movies, in comic strips and late-night talk-shows. Cruise-ship tourists wear T-shirts that read “I have a secret bank account in the Cayman Islands.”

In my early days here, my mother once passed on a warning from a friend of hers, that Gordon had better keep his wits about him, among all the crooks over in Cayman. The friend was a big wheel in Lloyd’s of London, and when that scandal broke in the late 1980s he found himself among a whole bunch of crooks over in London – well-bred and well-spoken, but crooks by any standard. As for Cayman’s clients: most big-time crooks have the sense to lose themselves in big-city crowds, rather than stick out like sore thumbs in small-town communities like ours.

Most of the world’s professional politicians have secret accounts in one Offshore haven or another, and we get our proportional allocation. But we don’t elect those politicians, or license their lawyers, and we don’t register any bank whose parent company isn’t already registered somewhere else. Barclays, Morgan Stanley, Deutsche Bank, Santander, Bank of Tokyo, Bank of China... not many of those are owned by Caymanian fishermen or taxi-drivers – or our bankers or accountants, come to that.

Outside the world of Offshore business, though, our tax-regime is not well known. Last month, as an idle exercise, I posted four very short (100-300 words) articles in the Cayman Islands sections of four international forums that I subscribe to. Three of the essays were titled “No Income Tax in Cayman” or similar and, the other, “Britain’s favourite tax haven”. Each post received as many hits in a week or ten days as any of my other posts had received in six weeks! (Those other posts were on topics such as Working in Cayman, Retiring in Cayman, and Doing Business in Cayman.) The numbers weren’t high, since Cayman’s sections are not frequented nearly as much as other places. But our absence of Income Tax sparked the interest of casual visitors.

We forget how lucky we are, much of the time. We also forget to honour the people and companies who set up the tax-haven back in the late 1960s, including (yes, this is true!) the British Government and its Foreign & Commonwealth Office (FCO). All of the promoters did it for their own selfish reasons, but selfish reasons are what drive most economic development. Once established, the tax-haven has been kept alive for the best part of fifty years, by expat professionals, FCO clerks, and local politicians – all acting selfishly while benefitting every resident of Cayman.

The runaway success of our tax-haven brought so much money into government’s coffers that a tax on wages has never been genuinely needed. Yes, our local rulers (politicians and Civil Servants) have spent Public Revenue like drunken sailors, and have borrowed to fund their extravagances. They would like to tax wages, and the FCO has strongly urged that they do; but they are well aware of what happened the last and only time that was tried. That attempt, by our Cabinet-equivalent in 1987, was routed by a ferocious outcry from voters mobilised by our Chamber of Commerce, of all people. We should honour them, too, whose efforts have kept any kind of tax on individual remuneration at bay for 25 years, and counting.

It is the Chamber of Commerce that has also kept Cayman free of any kind of tax on business profits. Government’s bureaucracy plays merry hell with the private sector’s productivity and profitability, but there is a line in the sand that it dare not cross.