A rhetorical question about the finance sector
Andre Iton writes: Permit me please the space to ask a question, even though I believe I do know the answer: In light of the anticipated short- to medium-term dramatic decline in public revenues anticipated and clearly inevitable from the disruption to the tourism sector, should the other “pillar” of the the economy, the financial services sector, be made to step up and increase its contribution to public sector revenues?
I think I do know the answer: Absolutely not. It will hurt the industry. I also know that the financial services industry is the epicentre of greed globally and that locally, it differs not one iota from the hegemonic global beast that it serves so admirably and so efficiently.
We have been told time and time again that any effort, anywhere, to make this purveyor of global inequality enhance its contribution to, or be more accountable to, its host(s) is but the creation of an arbitrage opportunity. (They going take the business somewhere else). So the reflexive response from the corridors of powers to any such suggestion: Left-wing radical nonsense!
But the question still needs to be asked because maybe, just maybe, we may want to begin to examine if we could do things a little differently, with the objective of moving our society to a more equitable state.
To get us through these difficult times and onwards to that desirable objective of a more equitable society is most definitely going to need much more than the “benevolent” grant of $124k the captains of the industry so graciously bestowed on the collective effort to get us past the immediate challenges.
“Getting back to normal”, frankly, means expecting less and less from our collective endeavours and hunkering down in the ugly individualism that has gotten us to this sorry state. That is exactly what the market driven solution would dictate.
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Category: Business, Financial Services, Letter to Editor, Local News, Viewpoint
I’m not rich and don’t have a degree in finance, but even a half illiterate can see that transferring productive use of capital to less productive use of capital doesn’t make good economic sense.
The only way the *greed* theory works is if those with millions of dollars held their money in cash and stuffed it into a vault, effectively moving it out of the economy. If that was the case (it’s not) then taxation would make some sense.
Careful with greed, we can take greed and turn it around on most anyone that exists above bare survival.
Where top partners of the big accountancy and law firms here are raking in tens of millions a year, there is room for a debate on high income tax bands.
Good point 7:44. Certainly needs to be discussed about people making millions a year in income here and paying zero income tax. Better that than taxing every individual earning income here. Next year we need to look at all options as we will have a cash flow problem in terms of CIG revenues.
Andre, when you line up for the vaccine, these points will be moot.
Price Elasticity of Demand refers to the purchase behaviour of a demanded/buyer to an increase for a Product that has an available and acceptable substitute, e.g. Pepsi vs Coke. To infer that financial services, in a low tax jurisdiction, has an available and acceptable substitute would be to identify another similar jurisdiction that is NOT under pressure of international,organizations like FATF (CFATC – the Caribbean body), OECD, EU and the lists goes on. Those jurisdictions, with a low tax regime and not under international pressure, are borderline non-existent – therefore most (not all) of financial services industry are actually moving to a Price Inelasticity of Demand. It is Cayman’s dependence on the revenue as a Supplier (supplying the low tax jurisdiction) that has the elasticity.
To a larger point, I think the gist of Mr. Iton’s views ( which he is entitled to – Guest, Resident or Work Permit Holder) was, perhaps, not properly understood or by his own fault not clear. I read it as any form of contribution to assist the Government purses (does not only have to be increase in “price”). Ms. Olde and Dart assisted by helping with the costs of the testing kits. Dart kicked start the R3 Resilience Fund. Civil Society and smaller companies assisted with the various Food Banks (for a wealthy Country we have a lot of hungry people with no savings). What has the Financial Services Industry (Banks, Insurance, Investment Funds, Trust, Lawyers, Accountants, Corporate Service Providers, etc contributed? I have a suggestion. Pool a fund from the Sector and help the Government with a specific cost (not a general contribution) of the expenses incurred as a result of COVID. For example, the cost of Government Quarantine Facilities. Or, more societal, Lap Tops and other or Educational Support to the many children who are being home-schooled with computers and internet. And the list goes on.
I support helping the Government and the Jurisdiction that allows them to operate in a low tax environment making huge profits (particularly investment funds), at a cost of the Cayman Islands being labeled “tax havens” and many other unpleasant names.
You’re a quintessential sesquipedalian and
your comment seems deliberately obfuscated. Try to avoid circumlocutions next time.
What you forgot to mention that CIG is responsible for many problems in the first place.
Helping an incompetent government with money so it continues saving public sector and ignoring private? Why would financial service industry do that?
As for your Price Inelasticity, let me remind you that the driver of any economy is a new idea.
Many brilliant minds would find its way out of your hegemonic “allowing them to operate in a low tax environment making huge profits“.
Someone hasn’t heard of the price elasticity of demand.
Too bad more people on island have not learned a bit of basic economics. We need to teach this in our public schools before young people graduate.
Andre Iton, the problem is that the CIG has received colossal annual revenues for decades (probably among highest per capita on planet), and should have fully funded agencies, no debt, and a growing capital reserve/investment fund. Alas, there remains a pervasive systemic culture of poor tracking of where it goes and which department spends what. Sure, it’s slightly better than it used to be, but it is still deep into the realm of unacceptable. FOIs are routinely rejected. Some have grown accustomed to 8 figure off-balance sheet bail-outs every few years, two public subsidized entities receive that much and more annually with little transparency. The previous Premier set up an 8 figure cookie jar of public funds and doled it out in his own name. Some of our money is outright stolen without charge or prosecution. Some of it spent on ego-driven capital monuments or lawsuits/settlements. There is poor planning, negotiation, and contract savvy in the deal making – much of it hidden from scrutiny. There is lots of illegal and immoral stuff going on behind the scenes. Naysayers and whistle blowers are put on full salary indefinite administrative leaves, and subsequent paid out redacted hush money settlements. There would be more than enough money for all kinds of things if it wasn’t continuously mismanaged and/or spent three times. Caymanians need to care and hold their government to much higher standards when it comes to attitude, behavior, transparency and the spending of our money. Telling the government not to spend tens of millions fighting their own people would be a great start. Demanding the private sector pay more into an irresponsible expenditure apparatus doesn’t fix the problem, right in front of you.
Has anyone thought about temporarily raising fees for the next 6 months followed by a greater and permanent lowering of fees for the firms that paid the higher fees during the 6 month period? This would reward firms that stay in Cayman and even reward firms that relocate to Cayman now, when the fees are most needed.
You are dreaming if you think that any fee that goes up will eventually go back down.
Mr Iton once again has failed to address the elephant in the room. The local titans of industry, be that in the shipping, food supply or hardware supply sectors have historically only contributed minute slivers of their significant profits to the government’s coffers. These businesses are highly profitable and have done well during this current crisis. Contrast that with the financial services sector that has been taxed inequitably i.e. at disproportionately high levels over the years.
Your either in the Tribe or not in the tribe.
It’s noticeable that there are no <> wings at the hospital, national gallery, public parks, food banks, pet sanctuaries, drug rehabs, or even churches. All these wealthy takers and no matching of Dart’s mini $1mln donation to R2 fund. No sense of social responsibility or philanthropy even to their own.
No wings at the hospital?! I sure hope they have nachos then!
And they better come with celery!
Comments like this would rather have 100% of 0 than 10% of 100.
Just recall when McKeeva upped the Class A banking fee from $100,000 to $500,000 we then lost 90% of our Class A banks.
8.42pm Shame we didn’t lose McKeeva in politics.
Mr. Iton it will be business as usual from Financial services. It’s not pragmatic to attempt increasing revenues from the sector to make up for the shortfall in these times.
Tourism will be back for sure. So it would make sense to get bridge financing to cover loss of revenues and prop up the economy which will eventually be paid from the return of the tourism industry. The industry will come back for sure. We just have to do the proper forecasting based on the development of vaccines etc.
You are sadly misinformed. Financial & professional services industry contributes directly over 50% of our GDP, and probably close to 100% over the last few months as they are able to WFH – or anywhere. You can confirm this in the Govt Statistics Office reports.
What you won’t see in the GSO reports are the way these companies and their employees are contributing to the restaurants and bars to keep them going by sending meals to employees, ARK, Meals on Wheels etc.
If you want a headline, take a look at who is contributing to Dart’s new fund as well.
The analogy of Fund Administration is apt, it is vastly reduced and we are the poorer for it, not just as employment opportunities but also as a negative impact on the OECD & EUs view of “substance” that may keep us on their blacklist. Working from home has made a lot of FS companies realise that working from anywhere is a short step from that – and if the rest of the industry follows administration we are in a lot of trouble.
The EU blacklist isn’t the only thing killing financial services, ignorance may do the job first.
The administration left with the loss of the 10 comandments. CIMA later brought in local audit sign off and everyone complained it would be the end of the industry so CIMA didn’t also require local administration.
You are dead right, you did know the answer. Your question is a bit like asking “why don’t we sell a $100k house for $1m that way we will make 10x as much money”. Most people can understand why that doesn’t work.
We already charge as much in fees as we can. That’s why we make so much money from financial services. But the moment you over-charge the amount of revenue will sharply decrease. Especially at the moment when I can say from experience that our customers are very, very, very fed up with endless compliance, regulation and costs and are spooked by the blacklisting.
At the end of the day, it doesn’t matter how much money is paid into a system that can’t be bothered to keep track of how/where it is spent. The CIG still refuses to be transparent – even with well-meaning folks like Andre Iton.
Thank you Mr Iton for this thoughtful commentary. Short but direct. I suppose now there will be onslaught of personal, derogatory jabs directed at you and your business, rather than focusing on the message. It’s refreshing and hopeful that people like yourself care enough and are willing to stand out and voice your opinion. I wonder where your counterparts and “stalwarts” of industry stand on this and many more topics plaguing Cayman society.
Except there are few turtles or fish to eat anymore and our oxen are running out of tails. There’s this delusion here that if the government can just screw the foreigner to the benefit of Caymanians, they get to keep all their toys and amenities.
Only people this government has been screwing is the Caymanians resulting in GUESTS like you feeling entitled.
Cayman kind?
Right so how should one reply to “screwing foreignors”….Ungratful Expat Kind?
Listen, Bobo, you have ridden the expat gravy train to a higher standard of living than anywhere else in the Caribbean. If you think it’s your God-given talents that go you the lifestyle you enjoy, you’re delusional. I understand that it has to work both ways, but the “screw the foreigner” attitude is coming out in spades right now and it’s disgusting.
Casting a vote (again and again) for confirmed idiots, and then blaming expats for your regretful leadership choices, doesn’t make any logical sense.
Government is not screwing the foreigners to the benefit of Caymanians. Government is screwing the Caymanians to the benefit of the foreigners in just about everything here. So get that right bobo!
I think you find your answers in “The Tale of the Fisherman and the Fish“. It looks like your momma skipped this bedtime story.
Our government used to know that story and understood instead of just collecting work permit fees we should also require companies to train and hire our people. Then came Alden….he just wants work permit revenue, the port and his pay no matter how much ‘his people’ are suffering.
But companies do train and hire your people. The problem is that SOME do not have the right work ethic which is not necessarily unique to Cayman.
The bigger problem relates to education as so many Caymanians do not have basic educational skills in reading, writing and arithmetic.
And insist on speaking the patois of Alden’s people. Sounds good in the ‘hood but very unprofessional in the work place.
They step up and subsidise us more than most already. How about we innovate and actually come up with some new ideas instead of beating the same old horse till it’s dead.
‘moving our society to a more equitable state’
You mean taking Cayman back to a mosquito ridden state where you fish to eat?
Taxing financial services will only drive it elsewhere, it’s globally mobile, and recent experience remote of working has amplified that ability.
Cayman immigration already killed the fund admin business by milking them for WP fees, and being obstructive, this will do the same.
Last one out turn the lights off….
The fact that some fund administrators actually lied on applications, and committed fraud on the government in relation to their hiring practices, played no role in immigration coming down hard on the industry? Good to know.
Not really….high permits was the solution Big Mac’s mismanagement which let to him trying to open the “purse” of taxation. All industries have been allowed to lie under Aldart’s reign of “work permits and PR for whoever can pay”.
I remember it well. Local adverts required workers to be CPA’s. Caymanians were refused interviews because they did not have required qualifications. Problem was that most of the expats actually doing that work (on work permits) did not have those qualifications either. Rather than apologizing and making good when they were caught, some in the industry just demanded the right to employ who they wanted without regard to local talent (or local laws). If people are willing to come here and act like that I wish them good riddance.
Oh yeah that did happen.
Sorry – you think a non qualified expat accountant is capable of doing an NAV on a Cayman HF – dream on
The problem was that there weren’t sufficient Caymanians qualified as accountants, and the long hours to cranks the NAVs out others off
That said, a large number of unqualified Caymanians were employed by fund admin shops and who were paid well, but they lost their jobs when CIG got greedy on WP fees and the difficulty in obtaining them
That is unfortunately the hard truth
India back office started before….didn’t need a hurricane to know it would be cheaper.
Hmmm… I was hired by a Hedge Funds administrator located in Bermuda and CPA certification was a requirement. Granted, administrators are different, so I can’t speak for them all….but in 1 year I realized that my skills and experience as a CPA weren’t utilized. Posting daily trades, reconciling accounts and printing and checking monthly investors statements is an equivalent of entry level accounting. Monthly NAVS, valuations, AML procedures, etc, are not that difficult and certainly don’t require CPA certification. I certainly knew nothing about it when I started. One with accounting degree can learn it easily. So, I quit in one year despite loosing lots of money.
By the way here, in Cayman, you would be surprised who works in financial sector and what kind of education and experience they have. But I also want to mention that Caymanians with accounting degree, with or without CPA certification, don’t stick for long in companies that require to work 12-13 hours/day (or as long as it takes to get work done).
Having said that, I strongly disagree with the featured Letter to the CNS editor. In fact, it is shocking to me that someone might think that after killing one cow, you can get twice the milk from another, just because it is still alive.
“But I also want to mention that Caymanians with accounting degree, with or without CPA certification, don’t stick for long in companies that require to work 12-13 hours/day (or as long as it takes to get work done).”
It doesn’t take that long to get work done. It’s just that these firms literally sell their employees’ time.
Not sure what you are talking about. Obviously you didn’t work in any of Big4. It takes more than 12-13hr a day to get job done. People work nights. The amount of work needed to get done during “busy season” is mind boggling. Highly intellectual work, “a billable hour marathon” it is called. There used to be 2, several months long “ busy periods” and now it is literally one year long “busy season”. So Caymanian employees leave for UBS for example as soon as they get certification and or 1 year experience working for Big 4.
Interesting what 7:09 and 6:56 said are both true. There are two sides of the story and neither are without blame. Caymanians shouldn’t expect promotions without the work, but those who put in the work should get promoted and not subjected to expat cronyism. BUT – the current system has worked out quite well for many Caymanian, much better in fact than it most likely would have if they were doing the same thing elsewhere. The exact same thing can be said for most expats working here though!
Having worked for years at one of the largest administrators on island I saw lots of crony and nepotistic placement of non-qualified when equally qualified Caymanians were available for placement or advancement.
The problem here is that unlike professional services in London, NYC and Toronto, lawyers and CPA’s are often required to put in 12 and 13 hour days to get the job done. So often I find that Caymanians in those areas, are not prepared to put in those same number of hours here.
1:31pm so you’re saying they hired expats with a degree but no CPA qualification over a Caymanian with a degree and no CPA?
LOL Okay. Stick with that BS. Sounds better for your narrative. But I know for a fact that is not true.
Or didn’t promote…yes that happened and how could you know it didn’t?
Oh you again? The really self important guy who wants to be able to recruit anybody he wants from whereever he wants or you’re gonna take the industry and leave….look don’t go away mad guy…just go away.
Some are already planning to “go away”.They won’t miss you but you will miss them. The question now should be: will there ever be a reason to return?
Yeah you’re deluded with your self importance…we’ve heard it before and the ones we lose are mismanaged and quickly replaced….ahhh buh bye!
I am actually hooked up to the financial industry in the States but do not work for them so I have no bias. All I have a re some facts, information, and a working brain. All you need is patience and time to see what I see.
Wow I think you might be hooked on something else too…starts with “crac” and ends with “k” (you probably still have a puzzled look on your face so I mean “crack”).
You’ll be replaced.
Cayman kind #2
Ungrateful Entitled Expat-kind #2
Fund admin left because in the immediate aftermath of Hurricane Ivan they needed to relocate staff or work to other jurisdictions . They then realized they could do the work from those jurisdictions for less money and pull from a broader pool of applicants. Likewise with a number of banks and other firms. Now the only jobs left in hedge fund land are in law (which can largely be done from anywhere), auditing (which can to a degree be done from anywhere), and director services (which can be done from anywhere). There are admin shops left but they offer more limited services out of Cayman than pre-Ivan. Economic substance offers some real opportunities.
Dunno what mosquito’s have to do with the article but it was Dr. Giglioli and associates that dealt with the mosquito issue. Not a bunch of bankers and fund administrators.