BOTs jittery over Brexit and EU clampdown

| 15/11/2016 | 2 Comments

(CNS Business): Britain’s loss of influence in the EU as a result of ‘Brexit’ could leave Cayman and other offshore jurisdictions exposed to tougher offshore tax rules. In addition to the problems of gaining access to the business in Europe, Brexit poses a challenge to Cayman in that the UK will no longer be in a position to lobby on behalf of its territories. The premier recently pointed to the uncertainty which Brexit is causing for the territories because neither the UK Government nor anyone else knows what the future holds.

The EU is already contemplating a new blacklist that is likely to include Cayman and other British Overseas Territories (BOTs) such as Bermuda, and with the UK now on the outside of decision-making process on what will impact its own economy and that of its territories, Britain can no longer offer any protection.

Premier Alden McLaughlin has made it clear since returning from London and this year’s Overseas Territories Joint Ministerial Council meeting that there are real concerns about Brexit because no one has any answers yet.

At the PPM George Town meeting last week McLaughlin said it was a “big issue” and a huge concern for all the territories. From travel rights and EU grants for some territories to the financial service sector concerns, the premier said that the truth of the matter is that the answer to the “many questions is anyone’s guess, as the UK sure don’t know what the answers are”.

He said the territories will be meeting with the UK purely on the Brexit question early in the New Year if “things become a little clearer”, but he also pointed out how the recent judgement of the UK courts, which found that the government needs parliament’s approval to trigger Article 50 of the Lisbon Treaty, could throw the timeline up in the air.

“We are a little country 5,000 miles away but we are still impacted by the decisions and no one really knows what the impact will be,” he warned, as he stressed the importance of least staying engaged with the UK so adjustments to protect Cayman from whatever happened can be made.

The main problem for the Cayman Islands is the financial services sector. Brexit could see the jurisdiction lose business as it loses access to the European free market, but at the same time face even tougher regulation for the business it can access.

While the pressures will be coming from Europe, Cayman still has the problem of beneficial ownership transparency coming from the UK, as the Conservative government there remains under pressure to fulfil Theresa May’s commitment to go “after tax dodgers, accountants, financial advisers and middlemen” who facilitate tax avoidance as well as evasion.

While Cayman and other offshore centres argue they already have effective means of preventing abuse without a public beneficial ownership register, critics point to the Panama Papers leak, which they say demonstrated the need for public disclosure.

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Category: Finance, Financial Services

Comments (2)

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  1. Jack Irvine says:

    I respectfully disagree with the Premier.

    It has been EU pressure on the UK that has brought so much pressure and interference on the territories over the past decade. This has been chiefly motivated by two things 1) the high taxation mantra of EU officials 2) Their pathological hatred of The City of London.

    Anything they could do to damage The OTs was another way of attacking The City as the world’s greatest financial centre. It is a tragedy for Cayman and the other OTs that the Foreign Office and former Premiers Gordon Brown and David Cameron behaved in such a supine fashion.

    Brexit gives the UK Government the opportunity to show some backbone when it comes to defending highly efficient offshore entities such as Cayman but this also means that local political and business leaders need to stand firm and protect their turf. You’ve had enough sand kicked in your face! Time to man up.

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