The Cayman Islands hit back Thursday at recent criticism of offshore tax havens by US politicians, saying it “deeply resented” suggestions that its offshore status made it “illegitimate”.
The unusual public defence of offshore financial centres by one of the largest operators comes as Washington has become increasingly uneasy about the role such havens may play in tax evasion schemes.
Carl Levin, a senior Senate Democrat, was last month joined by Barack Obama and Republican Norm Coleman in sponsoring a bill designed to stop perceived tax shelter abuses.
They estimated that the US Treasury was losing $100bn in revenue annually through “abusive tax shelters” and “the professionals who design, market, and implement these tax dodges”.
The Cayman Islands was one of 34 “offshore secrecy jurisdictions” listed, along with the British Virgin Islands, Anguilla, Hong Kong and Switzerland.
Alden McNee McLaughlin, Caymans minister for international financial services policy, said the main users of offshore financial services in the islands were multinationals and “big business, for whom the credibility of our jurisdiction is key”.
“We do deeply resent and seek to dispel the idea that somehow because we are not located onshore we are illegitimate.
“There is nothing about our industry which is intended to enable US investors or corporates to use these products that we have to evade taxes,” he told the Financial Times.
Mr McLaughlin was part of a Caymans delegation in Washington to meet Mr Levin, Barney Frank, the House financial services committee chairman, and other politicians.
The Cayman Islands’ financial services industry has grown rapidly in recent years and is now the largest offshore hedge fund administrator in the world.
Like the BVI and other Caribbean jurisdictions, the Cayman Islands has been steadily improving its regulatory regime after criticisms expressed in a 2003 report by the International Monetary Fund.
The IMF is due back in the Cayman Islands in about six months to assess progress.
A new law came into force Thursday in the islands requiring all hedge funds registered there to submit annual financial reports electronically to the regulator.