Cayman The Grand

By Global Tax Weekly

The OECD’s appointment of the Cayman Islands to be vice chair of the Peer Review Group of its Global Forum on Transparency and Exchange of Information for Tax Purposes comes across as a case of turning the poacher into the gamekeeper, although no doubt the Cayman Islands would be highly affronted by such a comparison. And the anti-offshore brigade will be grinding their teeth at the transmogrification of their precious hate object into respectable police-island. We can merely congratulate the world’s third-biggest accumulation of capital at its cleverness in negotiating the shoals of international financial governance, and wonder at the influence which has accreted to the unelected, rich country quango called the OECD. It’s not the only world body which has mysteriously and almost accidentally acquired power on such a scale (FIFA springs to mind as another example), but it is one of the most prominent. Other major institutions counting as global movers and shakers such as the World Bank and the IMF are directly financed and supported by their member countries, but the OECD seems to have acquired independent existence, albeit paid for by member country subventions, and unlike the World Bank, the IMF and the WTO (all three being Bretton Woods creations) it has no scripted, universal role on the international stage. And that’s worrying.

Few people now remember that the OECD was brought into existence to manage the United States’ Marshall Aid program after the second world war, and just as few perhaps remember that in the 1970s and 1980s the OECD, by then shorn of any obviously useful European role, functioned as an observer and commentator on the world’s leading economies, providing extremely helpful comparative economic statistics in an unbiassed, pragmatic fashion. From that essentially passive activity, worthwhile as it was, the OECD has transmuted into an agent of rich country policy, and this unbalances the international ecomonic equation in an unhealthy way. It’s not quite clear how that result came about, or even whether it was intended; but at any rate we are left with the consequences, which in a nutshell amount to a hegemonic high-taxing paradigm being imposed willy-nilly on the world’s varied economies without regard for alternative scenarios. In the 1990s, in the first flush of its newly granted powers, the OECD attempted to squash “offshore” (a low-tax, free-market alternative to the prevailing over-taxed, post-industrial socialistic economies of “Old Europe”) but was stymied by fierce resistance from groupings of low-tax territories, and a briefly sympathetic US administration. Hence the Global Forum, which was intended to be a means to reconcile the competing interests of high- and low-tax jurisdictions. Whether the elevation of the iconic Cayman Islands to vice chair of the Forum counts as a fig-leaf or as genuine evidence of conversion on the part of the OECD, I leave for you to judge. But you can imagine what I think: the insane indebtedness of the rich countries offers them no choice but to increase taxes and to continue to try to exterminate “offshore.” So please, Mr Cayman, have Mappin & Webb or Tiffany’s make you an extremely long spoon. You’re going to need it!

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