(CNS): The offshore legislation that government steered through the Legislative Assembly on Monday to avoid being placed on the latest European Union blacklist will likely fuel population growth in the Cayman Islands, Premier Alden McLaughlin has told the Legislative Assembly, echoing recent statements by opposition MLA Chris Saunders. As he defended the eleventh hour bills, McLaughlin said that without them Cayman would be blacklisted and that would be a disaster. He said the changes would likely result in an increased population, and if that is the case, it “would be an incredibly good thing”.
While it will come with challenges, he said, if it doesn’t happen and instead there is a flight of business, that would be far worse for Cayman’s future.
McLaughlin warned that while there are uncertainties about the impact the new bills will have, without adapting to the changing international regulatory regimes and new global standards, Cayman will be in much deeper trouble.
The three bills paving the way for a new dawn in offshore company registration — the International Tax Co-operation (Economic Substance) Bill and amendments to the local company control and companies laws, which were all passed late on Monday night — are likely to fuel an increase in the population because tens of thousands of currently exempt companies domiciled in Cayman will, in future, need to do actual work in the islands.
Depending on each individual entity and the circumstances surrounding their business, they will be required to have some form of office and staff, many of whom will inevitably be work permit holders.
But McLaughlin considered that a positive move as he asked his parliamentary colleagues to think about “the converse” — the departure of offshore business. That, he said, would be terrible, cutting into the local economic success and fueling serious unemployment, which he said was more likely to happen if Cayman took the road some have suggested, with taking a chance on blacklisting.
During the late evening debate he was extremely critical of some opposition members for not lauding government’s efforts. He condemned them for expressing concerns about the lack of clarity on what the legislative changes will mean for the offshore industry.
Saunders also suggested in a recent interview with CNS that government is asking the parliament to take a leap of faith and support the laws without anyone really knowing what the result might be.
But McLaughlin made it clear he believed blacklisting would be disastrous for Cayman. With the concept of ‘economic substance’ emerging as a global standard anyway, he was confident that the jurisdiction will, as it has in the past, ride out this change by being better at what it does than its competitor jurisdictions.
He said that legitimate offshore entities should have no fear of continuing to do business in the Cayman Islands under the new regime and in the end, this latest imposition from the onshore world would see Cayman succeed.
He admitted that there were challenges with drafting the bills, which he revealed had been through “countless iterations” and were still being shaped right up to the last minute, on advice from the industry. But despite the difficulties surrounding the entire process, not dealing with this was not an option.
Without the new legislation, “we will be blacklisted by the European Union”, he warned.
He said that Cayman was in the same position as dozens of other countries threatened with blacklisting and if his government didn’t get the legislation right, it could be rejected by the EU, as is the case with Bermuda, which has gone back to the drawing board two weeks before the deadline of 31 December after the EU found the changes that jurisdiction proposed to make were not sufficient.
He described the process as weighing heavily on him and the financial services minister, and justified their extensive travelling this year, which he said was not because they “enjoyed globe-trotting” but to deal with this problem.
The premier said this issue was not just about the technical elements of how we create a legislative regime to pave the way for the economic substance test but the political issues that relate to the continued attacks on places like the Cayman Islands. Engagement, he said, had been as critical to Cayman’s survival, as it has been in the past, and he was convinced that, at the end of the day, as it always has, the country would come out stronger.
“We have confidence that Cayman is not only going to survive but continue to thrive,” he said of the latest adaptation the jurisdiction is making to remain open for business.
There are, however, numerous unanswered questions with the legislation and concerns that there has not been enough consultation. Nevertheless, Financial Services Minister Tara Rivers claimed it had gone through a significant period of consultation with the stakeholders and the offshore sector, with drafts being written and re-written based on the changing landscape.
She also said that it was not until June that the European Union gave a more fulsome idea of what it meant by ‘economic substance’, which was essential information the technocrats here had needed for drafting the laws and explained why the bills were arriving so late.
Rivers spent the bulk of her introduction to the legislation explaining why the laws had taken so long to draft and why government was forced into the eleventh hour before it was able to publish the bills.
Through she outlined the history of the new law and the amendments to the existing bills, she gave little detail in her presentation of the fundamental changes many industry experts believe will happen after their implementation.