Thursday, August 09, 2012

Cayman tax dodging buckles

Tax-dodgers' paradise the Cayman Islands buckled to the bankers' lobby today and scrapped plans to introduce a meagre income tax on wealthy expats.

Premier McKeeva Bush said the plan - conceived to dig the islands out of a $65 million external debt - was now "off the table."

Just 54,878 residents call the Caymans home, but so do more than 9,000 hedge funds, 260 banks and 80,000 companies, with Barclays alone reporting 174 subsidiaries and ventures there last year.

With no corporation or income tax, the industry employs an army of thousands of expat tax lawyers and accountants who brought the attempt to impose a mere 10 per cent tax on their earnings crashing to the ground.

Chartered accountant and campaigner Richard Murphy predicted "chaos" in the Square Mile's tiny tropical outpost following its decision.

Mr Murphy said he now expected expatriates to follow Jersey's lead and demand that locals weather the tax burden instead - most likely in the form of an additional sales tax.

"But all they'll be doing is inciting the sort of backlash against tax haven mentalities that now seems likely worldwide," he said.

A 2007 study found income inequality in the Caymans even higher than Britain.

The wealthiest 20 per cent of the population accounted for nearly half the country's consumption, while the bottom 20 per cent accounted for just 5.8 per cent.

But Mr Murphy expressed hope that local democratic movements could call their tax-dodging squatters to account.

"There would be a sense of justice in it if it were to happen and the more local people suffer in places like Cayman and Jersey for the abuse being administered from their shores the more likely that is to happen."

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