SENATORS TELL NEW US TREASURY SECRETARY TO ELIMINATE CAYMAN ISLANDS AND OTHER TAX HAVENS

Members of the United States Senate, yesterday interviewing the new Trump Administration nominee for Treasury Secretary, asked the candidate how he intends to close down the Caribbean Tax Havens, specifically naming the Cayman Islands. The Senators were demanding details on how the new Secretary expects to close the tax loopholes that allow American entities and individuals to use foreign subsidiaries, in zero-tax jurisdictions, to avoid taxable events.

The Senators, in their questioning, focused upon the Cayman Islands, as well as the more obscure tax haven of Anguilla, in showing their displeasure of what they clearly indicated was abuse of American tax laws. We have recently detailed how financial service professionals, working in the Cayman Islands, intentionally use combinations of jurisdictions, like forming a BVI company, owned by a Belize trust, to create a totally opaque, non-transparent vehicle, tax-free, with no identifiable beneficial owner.

In the aftermath of the Panama Papers scandal, members of the Senate and the House of Representatives have affirmed the immediate need for effective tax reform, whether through new legislation, or Treasury regulations, to eliminate the present situation; they appear to be looking for the incoming Treasury Secretary for a solution; Political pressure is clearly present on this matter.

What will the end of offshore tax advantages for US taxpayers mean, to the Cayman Islands, as well as other Caribbean financial centers that do not impose taxes upon profits ? Will investors, and the hedge fund industry, flee Grand Cayman, completely torpedoing the local economy, and plunging the island into a major depression, requiring financial aid from the UK ? We cannot say, but we will be closely watching Washington in 2017.