Cayman Islands scrap planned income tax

Tax haven remains tax haven.

The Cayman islands, famed for being a haven for tax exiles and a jurisdiction which imposes minimal transparency requirements on foreign businesses, has scrapped an income tax which it was planning to levy on expatriate workers.

The Associated Press reports:

[Premier McKeeva] Bush announced in late July that he planned to impose a direct tax on expatriate workers' income Sept. 1 to bail the territorial government out of a financial hole and to meet Britain's demand that Cayman diversify its sources of revenue beyond the work permit fees, duties and other fees it now relies on.

He later said the annual income threshold would be $36,000, which would have affected about 5,870 expatriates. He described it as a "community enhancement fee" rather than a tax.

The proposal outraged many people, who said the tax would be discriminatory and could destroy the islands' main economic anchor.

The tax is, of course, problematic; imposing a special fee just on expatriate workers is a prima facie unjust thing to do. But it is somewhat surprising that Cayman residents have been quite so vehemently opposed to what is, after all, a relatively normal thing to experience in other countries.

It's almost as though they moved there for the express purpose of avoiding tax. Almost.

Scrapping the tax now leaves the Islands with a black hole in their finances, which the other ~48,000 residents of Cayman will struggle to pay off. But there could be a silver lining to that, as accountant and tax campaigner Richard Murphy writes:

The idea that local democracy could actually bring tax havens down is, however, one that I do find rather appealing. 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 moper likely that is to happen.

The Cayman Islands. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Donald Trump's threats give North Korea every reason it needs to keep nuclear weapons

The US president's warning that he may “totally destroy” the country is a gift to Kim Jong-un's regime. 

Even by Donald Trump's undiplomatic standards, his speech at the UN general assembly was remarkably reckless. To gasps from his audience, Trump vowed to "totally destroy" North Korea if it persisted with its threats and branded Kim Jong-un "rocket man". In an apparent resurrection of George W Bush's "axis of evil", the US president also declared: “If the righteous many do not confront the wicked few, then evil will triumph". 

For North Korea, Trump's words merely provide further justification for its nuclear weapons programme. Though the regime is typically depicted as crazed (and in some respects it is), its nuclear project rests on rational foundations. For Kim, the lesson from the fall of Saddam Hussein and Muammar Gaddafi was that tyrants pay a price for relinquishing their arms. The persistent threats from the US strengthen the regime's domestic position and reinforce a siege mentality. Though North Korea must be deterred from a pre-emptive strike, it must also be offered incentives to pursue a different path. 

As Trump's Secretary of State Rex Tillerson remarked last month: "We do not seek a regime change, we do not seek a collapse of the regime, we do not seek an accelerated reunification of the peninsula, we do not seek an excuse to send our military north of the 38th Parallel. We are not your enemy... but you are presenting an unacceptable threat to us, and we have to respond. And we hope that at some point they will begin to understand that and we would like to sit and have a dialogue with them."

The present nadir reflects the failures of the past. In 1994, the Clinton administration persuaded North Korea to freeze its nuclear programme in return for economic and diplomatic concessions. A communique declared that neither state had "hostile intent" towards the other. But this progress was undone by the Bush administration, which branded North Korea a member of the "axis of evil" and refused to renew the communique.

The subsequent six-party talks (also including China, Russia South Korea and Japan) were similarly undermined by the US. As Korea expert Mike Chinoy records in the Washington Post in 2005, the Bush administration provocatively "designated Macau's Banco Delta Asia, where North Korea maintained dozens of accounts, as a 'suspected money-laundering concern.'" When a new agreement was reached in 2007, "Washington hard-liners demanded that Pyongyang accept inspections of its nuclear facilities so intrusive one American official described them a 'national proctologic exam'".

For North Korea, the benefits of nuclear weapons (a "treasured sword of justice" in Kim's words) continue to outweigh the costs. Even the toughened UN sanctions (which will ban one third of the country's $3bn exports) will not deter Pyongyang from this course. As Tillerson recognised, diplomacy may succeed where punishment has failed. But Trump's apocalyptic rhetoric will merely inflate North Korea's self-righteousness. 

George Eaton is political editor of the New Statesman.