Bermuda, Cayman can combat threats together
Bermuda and the Cayman Islands should work together to address external threats, says the head of the body representing Cayman’s financial-services industry.
Jude Scott, chief executive officer of Cayman Finance, said as fellow offshore financial centres, the two territories were frequently having to deal with the same international pressures.
Mr Scott was speaking in an interview days before the Financial Times reported on Wednesday that the European Union is to put Cayman on its blacklist of jurisdictions deemed noncooperative on tax matters next week.
“I would like to work with industry peers in Bermuda,” Mr Scott said. “Many of the threats are common. There’s an aspect of us not being understood and an aspect of competitive unfairness, as some use these threats as tools to compete against us.
“Our voices need to be heard, we can’t do it from one press release or trip.
“I think we need to work together and use the talents that are in both jurisdictions to find better ways to address some of these threats and turn them into opportunities, to share the good news about jurisdictions like ourselves.”
He suggested that such collaboration could take place not only at industry level and between promtional bodies Cayman Finance and the Bermuda Business Development Agency, but also at political and civil service levels.
“Even though, historically, Bermuda and Cayman have seen themselves as competitors, I think there are enough differences between us that we would benefit hugely from working together,” he added.
Cayman specialises in investment funds and financing, while re/insurance is Bermuda’s flagship industry.
Bermuda-Cayman collaboration could be a starting point for potential closer relations between a wider group of offshore financial centres, he said, showing a united front to counter threats that were sometimes designed to “divide and conquer”.
Mr Scott added: “There’s so much in common between Cayman and Bermuda, that it would be great for us to be working together. I think then others would look to participate more readily, if they see partnership and trust working.
“We can either work together, or face being permanently damaged and separated by these threats.”
Both jurisdictions have had to enact economic substance legislation to address EU concerns over tax avoidance and both are being pressured by Britain to make beneficial ownership registers public. The Organisation for Economic Development’s proposal for a “global minimum tax rate” represents more international pressure coming down the pipeline.
At the same time, Britain’s departure from the European Union has also deprived the Overseas Territories of representation in Brussels.
Mr Scott argues “many of the threats have no fundamental basis”, but that they have to be dealt with systematically.
He said: “The biggest risk to successful jurisdictions like ourselves are one, if we’re complacent; two, if we think it’s someone else’s responsibility to better understand us, or stop being unfair; three, we have to ensure that we’re always providing value, we’re always upholding high standards and we’re always demonstrating that we don’t cause tax harm.
“If we forget these things, then that’s when we start putting at risk the amazing industries that we’ve built.”
Communication is key when countering the “tax haven” accusations. Clarity and using data-supported, factual information are two essential elements, according to Mr Scott.
“Us having that information does not do any good unless we’re proactively expressing it,” he said. “When there is an attack on the jurisdiction, we view that as an opportunity for us to explain to the world how that is incorrect and how we provide value.
“The irony of it is, when I look at jurisdictions like Cayman and Bermuda, these are the top-tier financial centres, G-20+ countries.
“We have high standards and generate tremendous value to the global economy. The three key pillars are that we provide value, we follow global standards and we do not cause tax harm.”
He was confident in the future of Cayman’s financial-services industry, which he said employed 7,000 people, about half of them Caymanians.
“We’re focused on our role as a very efficient neutral hub, connecting parties around the world,” he said. “As long as the world needs investment capital and financing, then there will be a role for the work we do.
“The fundamentals that we’ve built in terms of skill sets and infrastructure and expertise will always be needed. The barriers are the threats we’re seeing now.”