Cayman smells the coffee

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Cayman NetNews says in its latest editorial (which, I have to admit could only have been written based on information on this blog) that:

The financial services industry in the Cayman Islands may soon have to cope with yet another twist in the ongoing fallout from the global credit crisis, namely, that the governments in a number of major industrialised countries - Britain, France, Germany and the US, to name just four - are or soon will be substantial shareholders in several large international banks.

So what, one might ask. Well, some of the banks in question - perhaps all of them - have operations in offshore tax havens, including the Cayman Islands, and concern is being expressed, initially in Britain, that such offshore units might be "systematically avoiding British tax or helping customers to do so,'' according to one Liberal Democrat politician, Vince Cable.

It is clearly anomalous, and fraught with political implications, for any government to be funding a financial operation that has as one of its purposes the avoidance of taxes paid to the same government.

They're right. They add:

All three British banks mentioned have offshore operations of one kind or another, including RBS Coutts, which keeps accounts for wealthy customers and operates in Jersey, the Cayman Islands and the Isle of Man.

The UK Treasury is accordingly being called upon to tell banks receiving government funding to close their operations in offshore tax havens.

Given that the British government says protecting taxpayers is central to the plan, it seems on the face of it that such a demand might be hard to resist, especially for a Labour government already in some political difficulty.

Clearly, this debate in Britain is far from over and is more likely to intensify before any conclusions are reached.

It is also likely that the same debate will cross the Atlantic, especially as it is looking entirely possible, even probable if the latest opinion polls are to be believed, that Senator Barack Obama will be the next president of the United States. And we all know what his attitude is towards the Cayman Islands in particular and tax havens in general.

We are already being pointed to as the most convenient scapegoat for just about everything that currently ails the global economy, notwithstanding that what has gone wrong was more than likely orchestrated in London or New York, so it won't take much for a new US administration to exercise its newly acquired proprietary influence over the activities of its domestic financial institutions.

It is far too early at this point to predict how things will eventually play out in this respect but, once again, the writing is on the wall for those alert enough to read and heed it.

Oh yes. That's definitely true.