Britain's Trillion Pound Island - Inside Cayman

We may be shivering,

but there's one bit of Britain where things are very different -

the Cayman Islands.

It's a Caribbean paradise of sun, sea and cocktails,

but there's something else going on - big money.

It's one of the most secretive places on earth

and for one very good reason.

-Cayman is a tax haven.

-Correct.

Cayman is a tax haven.

'Or is it that simple? I'm here to get the truth.'

-Are you saying you're not a tax haven?

-We're not a tax haven at all.

Is what happens here a scandal or is it just how the world does business,

including many of our household brands?

I'm Jacques Peretti

and I want to find out, what does this place mean for all of us?

I'm coming to a secret bit of Britain, 4,500 miles away,

and 400 miles south of Florida.

In Britain, we're obsessed with...

Tax evasion and tax avoidance. This is an issue whose time has come.

But on the Cayman Islands, no-one pays a penny.

And for the first time, they'll be opening their doors to an outsider.

And while the beaches aren't much like Blackpool

and the suburbs are a bit more glitzy than Slough,

the Cayman Islands are well and truly British, with one big difference.

-So no-one pays tax here, Hyacinth, including you?

-No-one pays taxes.

We're a tax-free haven here, you know.

Cayman's the same size as Bognor, with the same number of people.

It's a British Overseas Territory, which means they have

their own government and a British civil servant watches over them.

But this Bognor-sized island

has a staggering one and half trillion pounds in the bank.

But for the first time, they're letting cameras in.

After years of being slagged off,

they want to show the world they've got nothing to hide.

'I'm going to use this unique opportunity to confront

'the people who make this tax-free island tick...'

Explain to me how the system works.

Yes, but you've got to please turn off the camera.

'..to discover what life is like for ordinary Brits

'on this island of the super-rich...'

There you go - ready meal, no rice, 14.29.

'..and most importantly, to find out what effect its existence

'could have on our lives back home.'

What's going to really happen in Britain

is that you guys are going to have, like, a social unrest,

because people there are a lot different from the people here.

The first thing I need to understand is how this place works.

I'm meeting millionaire businessman Marcus Cumber,

whose family connections could help me unlock Cayman's secrets.

-Hi there, you must be Jacques.

-Marcus, nice to meet you.

-Nice to meet you.

-Shall I get in?

-Absolutely. Welcome to Cayman.

Well, we're in West Bay, so let's have some fun.

'Marcus's grandfather ran this place when the British government

'first turned Cayman into a tax haven in the 1960s.'

So here we are, Jacques, at a school named after my grandfather.

He was obviously very, very honoured.

The foreign affairs said, "You're going to the Cayman Islands."

And, of course, in those days you had the globe

and he looked and he looked and he looked

and literally it was a little pinpoint that said, "UK."

'Marcus is going to show me how this little pinpoint was

'transformed into a paradise for the big business and the super wealthy...

'..starting with one of Cayman's most exclusive neighbourhoods.'

This is where I'm hoping to build.

We've got shipping magnates, we've got Krispy Kreme Doughnuts.

The guy who owns that.

You know, some of the most successful lawyers in the world.

'Of course, Marcus has bagged the best plot for himself.'

Six bedrooms, eight bathrooms.

It has a gym, it has a sort of man cave, if you want to call it that,

it has three swimming pools.

'And the best thing about an oceanfront mansion...'

I want to be able to walk around the property here completely naked

and no-one see me, so we've got the best landscapers as well.

We've got the same landscaper

that I'll show you that did the whole of Camana Bay.

-Can I walk around naked when I'm here?

-Absolutely, if you wish to.

The only people that should see you are people that would be in a boat

that happened to go by.

-Right, well...

-You'll have to dive for cover.

Cayman may be beautiful,

but the world's wealthy and some of our biggest businesses,

including Tesco, Barclays and BP, are here for another reason...

..its financial system.

If you want to understand how Cayman works

and how the whole global economy works,

you need to understand one simple little word - offshore.

It's a British invention

and it turns everything you think you know about money on its head.

Given the nod by a man at the Bank of England in 1958

called George Bolton, offshore is fiendishly clever.

It meant that certain deals made in London would now be viewed

as not taking place in London at all...

..but the first time where business actually happened

and where regulators said it happened could be different.

So these deals were happening nowhere at all - in thin air...

..an unregulated space we now call offshore.

Offshore changed everything.

It's not a tax dodge, it's at the heart of how the world does business

today and the idea would become the basis of Cayman's entire existence.

So how does offshore work here? Marcus wants to explain it to me.

It is an amazing lifestyle that you have here, no doubt about it,

that you've shown me,

but, you know, to the rest of the world, to the outside world,

the only reason...the perception is, the only reason

you can fund it is because Cayman is a tax haven.

Correct. Cayman is a tax haven. I think it's best

-if I just pick up a stick and try to show you.

-Yeah.

If we say this circle here is Japan and this circle here is America

and you've got a company here that wants to buy 10 billion

-worth of steel over five years...

-Right.

..what will happen is, where do you make that transaction?

Does it happen here in America or here in Japan?

No, what happens is they come down to somewhere like Cayman,

a neutral tax haven, and they open up a holding company.

So Cayman is providing basically the vehicle for international capitalism

-to work, essentially?

-Correct.

But it turns out that invisible business transactions

aren't the only weird thing offshore in Cayman.

Marcus has one last thing to show me.

-Those are, um, those are stingrays.

-They are stingrays indeed.

-Behold my Bond moment.

-OK.

Give yourself a big shove but we don't want to land on a stingray.

-I'll come with you, hang on.

-One, two, three, go.

Whoa!

So they're having a little frenzy right now.

'The stingrays coming for tasty bait remind me of only one thing -

'companies flocking to Cayman.'

I'm going to call this one Sainsbury's, this one Tesco,

that one Facebook, this one Manchester United. He can be Disney.

They've all come to the Cayman Islands.

'All these companies say they're not here to avoid tax

'and that they paid their liabilities in the UK.

'So is it a giant loophole in the sun or is it something else?

'What's been created here is extraordinary,

'but it's not the whole story.

'In fact, it's just the beginning.'

Marcus comes from a Cayman dynasty,

but there's plenty of ordinary Brits who've moved here too.

'What does their life here tell us about how an economy like Cayman's

'works for ordinary people?'

-Paula.

-Hey.

-I'm Jacques.

-Hi, pleased to meet you. Paul, Jacques.

-Paul.

-Hello, Paul.

-Come on in.

-Come in, Jacques.

-Cheers, thank you.

'I'm meeting Manchester's own, Paula and Paul, to find out.'

Come on, Paul.

-There you go.

-Lovely.

-Well, a fry-up in 90 degrees.

-Yeah!

Are there lots of Brits out here?

Yeah, well, can you believe we moved here

and then the man next door comes out and he's a Manchester United fan

and we're Manchester City?

So we were like, "Really?

"We've come all this way and this is what happens."

There is another reason for coming here

-which is you don't pay any tax, do you?

-No.

-Was that an attraction to you?

-You know, at the time that we came,

yeah, we were paying a lot of taxes, corporation tax, all kinds of taxes.

I worked for British Gas doing payroll,

-Paul had a construction company.

-I had a construction company, roofing.

'So has the tax-free pay packet paid off?'

I mean, do you mind me asking...

-No.

-..but how much do you earn when you're here?

I would say our average weekly wage between us

-is...

-1,000.

-..about 1,000 CI.

-It's about £800 a week.

-800.

-About £800 a week.

'800 quid a week jointly is just over £40,000 a year,

'the same earnings as an average family in Britain.

'Paula earns it looking after cruise ship passengers,

'working all day on a sun-drenched island and paying no tax on it.

'It sounds like a sweet gig to me, but I'm about to find out.

'Paula's invited me to try it out for myself.'

-Tropicana Tours.

-Green and yellow bus.

-Green and yellow bus.

-Bus driver John.

-John.

-John.

-John.

I've lost my lollipop.

-Right, and your schedule.

-And my schedule, oh, my God!

-Let's go.

You walk round with that sign,

you go to the bathroom with that sign and 21 people will follow you.

-Oh, my.

-So just...

-I'm looking forward to that.

Two, four, six, seven.

Does a baby count? Stay with me.

-You're in safe hands.

-You want to keep shouting, Jacques.

-Yeah.

'Cayman's tourism industry means that on cruise ship days,

'10,000 people pour off the boats looking for T-shirts and cocktails.

'This tiny island is rammed, but Cayman's finance industry

'has brought 100,000 businesses here, that's 10 for every tourist.

'I wonder where they all are.'

Five, six, seven... Oh, start again.

All right, is everyone ready for their tour?

-ALL:

-Yes!

I would just like to say a warm welcome to you all.

It is nice having you with us

today on our little island of paradise which is Grand Cayman.

Also, Cayman is tax-free

and we have over 600 offshore banks on the island today.

Got all your belongings? Good. Enjoy yourselves. Have a great day.

Is that it? Have we done it?

Well, you've got to just make sure everyone's settled.

It's not the end of your day yet. Why, are you tired?

'So that wasn't as easy as I thought.

'Paula works as hard as she did back home and earns the same, but doesn't

'pay a penny of income tax, so surely she's much better off?'

-What do you need to buy?

-Just something for tea.

-Let's have a look.

-Cod steak, yeah.

-And we're living on the ocean.

-6.79, which is about £4.50.

-That is ridiculous.

-Yeah.

-We have got to get this.

-OK, all right, fishfingers.

-11.

-Shall I get...

-We've got to get it, Paul eats it.

-It's his favourite.

-OK.

-Got to get them.

'That's £8.50 for a pack of fishfingers.

'Why is everything so expensive?'

So you don't pay taxes, but you burn through the money at the supermarket.

Yeah, yeah, cos the prices are inflated. I mean, obviously,

cos of the import tax, they've got to import everything,

especially for buying British things.

They're coming in on the planes and boats, but, yeah,

you've got to eat, Jacques, so what are you going to do?

-I think we'll head on out.

-Definitely.

'What I'm learning here

'is that though companies don't pay tax on profits,

'duty is loaded on to ordinary people's everyday shopping bill.'

-This is our big shop.

-Yeah, oh, one thing, Jacques.

-Of course.

-Eight dollars.

-Eight dollars for Hello! That's a bargain.

-That's quality gossip, isn't it?

-Quality gossip.

-Gossip at a price.

And two weeks late.

I've worked a shift and I'm knackered,

but I've learnt an important thing about this island.

Paula doesn't get taxed on her income,

but she does pay taxes whenever she buys food.

So even though her pay packet is the same

as when she worked for British Gas,

the only way Paula's got more in her pocket

is by cutting back on her spending.

I'm discovering that in spite of its tax breaks,

this island doesn't necessarily work so well for ordinary people.

Does it work for the rich?

To really understand Cayman, I need to find out.

If I want to become a Cayman resident and pay no tax,

one of the ways to do it is to buy a house here,

so I'm going to meet Michael Joseph,

who deals with millions of pounds' worth

of property every year.

-Hi.

-Hi, Michael. Nice to meet you.

-Absolutely. You too. Welcome aboard.

-Cheers. Come on down. Thanks. Thank you.

-This is Pablo...

-Hi, Pablo.

-He's my... Well, I don't know.

-He's your boss.

Well, whenever I get on the boat, he has to come with me.

'Michael is Cayman's number one estate agent.'

We've got, on Seven Mile Beach, which is at the high, high demand

and low supply, a running foot of beachfront there

-is going to go from sort of 100,000-200,000.

-Wow!

Up here, is probably the second choice

as far as demand is concerned.

'An average four-bed in Cayman - nearly £2 million.

'What's their real attraction -

'the golden sand, the spectacular views

'or a bricks-and-mortar passport to a tax-free status?'

Looking at the people who are buying these properties,

you could probably add a nought

and actually still afford it, pretty much.

So if they're buying the property and they're becoming a Cayman resident,

then actually the benefits they're getting from that are probably

all the financial benefits, you know, the tax benefits,

-that's kind of what it's about, do you see what I mean?

-Yes.

It does make sense and, again, I don't want to broach

too much into the tax implications or advantages.

-My job here is to sell lifestyles and...

-But is that what people...

-You're...

-I do get an awful lot of people that come here

and they investigate and I direct them to different attorneys,

whether it's a tax attorney

and I encourage them to speak to their own tax attorney,

whether it's stateside or in Europe.

'With all this talk of lawyers,

'Michael seems very keen to reassure me there's nothing shady going on.'

I mean, I'm asking you about the sort of people who are moving here

because they want to get the tax benefits and all the tax haven stuff,

do you think Cayman gets a bit of a bum rap in a way because...?

Gosh, absolutely, Cayman, you know...

It's the same as when you're watching these films

and it's some sort of terrorist chase in Brazil or something

and then you can almost predict exactly when they're going to say,

"Well, we've got to wire the funds to the Caymans."

It's like, really, how many times have we heard it? It's just so...

It's harder to open up a bank account in the Cayman Islands

than it is anywhere else in the world.

Now, admittedly, yes, of course, back in the day,

in the '60s and '70s,

there were those terrible stories of wet money in suitcases that

came off Noriega's boats, but again, for the last 15, 20 years,

it's impossible for that stuff to happen any more.

'One way to get Cayman residency

'and that tax-free lifestyle is to have an annual income of £94,000

'and to invest £390,000 on the island,

'which could mean buying a house.

'Back home, 390 grand gets you a semi in Croydon,

'here it gets you Cayman residency.'

I love that one, that's really...

-Visualise it, visualise it. It will be yours.

-OK. A suitcase of cash.

No, that doesn't happen any more. That does not...

Seriously, that does not happen any more.

That was back in the days when...

-Well, you've called your dog Pablo after Pablo Escobar.

-No, it's not...

There's a little influence,

but that's just the comedy factor, that's all.

-It's nothing to do with Pablo...

-OK.

-..the true Pablo Escobar.

-No.

What Michael's shown me is this -

unbelievable homes, jaw-dropping homes, on a James Bond island

where finance is the only game in town.

So I've discovered a lot from the three people I've met,

but to uncover how this place really works and its importance for us

back in Britain, I'm going to have to do some investigating of my own.

You'd think the first step to taking advantage of this place is

to get a bank account.

Cayman bank accounts are famous the world over,

so how easy is it to get one?

Michael told me it's harder here than anywhere else in the world,

so let's find out.

Wow! That is amazingly simple,

it's unbelievable how easy it is to open a bank account here.

Basically, I was just given this piece of paper which says...

They've helpfully highlighted, in case I'm a complete idiot,

just the four things that you need.

Bank reference letter from a bank you've been dealing with,

an employment letter,

some bank statements from the past three years,

photocopy of your driver's licence or a passport

and a recent utility bill and that is it.

Once you've got those things,

you have yourself a bank account here in the Cayman Islands.

But before you pack your bags, a reality check.

Like a bog-standard bank account back in Britain, this is just a place

to put money and they'll need to check I'm not a money launderer.

To get Cayman's tax-free benefits, you need to be a resident here, but

is being here something a British business needs to worry about?

We know profits registered in Cayman are tax-free,

so how do companies bag that benefit?

I've heard it's as easy to buy a Cayman company online

as it is to buy a DVD.

You can set up the company in Cayman from anywhere in the world.

I need a shareholder and a director

and that could be the same person, so I guess that's me.

No taxes. That's nice of them.

All I've got to do now is register it.

That takes up to 24 hours.

24-hour turnaround.

For 487.80. Done.

There will be due diligence checks, so now I could go to bed

and tomorrow be the proud owner of a Cayman registered company.

So do I actually have to have offices here?

To find out and to get closer to how Cayman really works,

I'm going to track down some brands we all know back in Britain

that have linked companies here.

I need to find the offices of Manchester United Football Club.

Do you know where they are?

I would presume the offices for Manchester United club must be

in Manchester, England.

Tesco? What about Disney?

-Burger King?

-Yes.

-Yes.

I haven't seen a Disney office here.

-Have you seen them here?

-No, sir.

-No?

But is it their offices or is it just a branch of Burger King?

It's just a branch of Burger King.

'As always, if you want to know where something is, ask a taxi driver.'

-They're based here.

-What, in one of the banks, or what?

Yeah, they're...

Have you heard of any of these companies? Do you know about them?

These companies are basically undercover,

-so you won't see them physical.

-That seems to be the... All undercover.

-That's how the world is.

-That's how the world is.

Andrew and his mate basically said that the companies here

are undercover, so that's what I'm looking for - undercover companies.

Everyone here knows what the deal is.

The only people who don't know what the deal is

is us back in Britain.

When even the taxi drivers can't help,

where do you begin to look for an undercover company?

It turns out that just at the end of the high street

is Cayman's most notorious building -

Ugland House.

President Obama picked on this place as the symbol of everything

that's wrong with the tax haven system.

You've got a building in the Cayman Islands that supposedly

houses 12,000 corporations.

That's either the biggest building or the biggest tax scam on record.

In fact, Obama got it wrong - there are nearly 20,000 companies in there.

'When the island struggles to fit 10,000 tourists,

'how on earth does a single building hold almost 20,000 companies?

'I'm going to find out.'

-Hi, there.

-Morning.

-Hello.

-I wondered if I could come in?

-No, sir.

I'm sorry, but this is private property

and there's no filming, it's not allowed, I'm sorry.

Oh, OK, because... Why is that? Who owns the building? Do you know?

I mean, there are nearly 20,000 companies in here, aren't there?

-Is that right?

-Yes.

And who should I speak to? Is there anyone I can speak to here?

Can you please turn off the camera, sir?

So it's pretty clear that the polite

but very firm security guard is not letting me in.

There are nearly 20,000...

20,000 companies registered in that one building

and I can tell you looking through the window, I saw a lot of desks

but there wasn't a single person sitting at any of them.

Of course, there are people working in Ugland House,

lawyers looking after all those companies

and I'm going to meet someone to get answers on how one building

can become a multi-million pound Tardis.

They almost never speak to the media, but someone from the very heart

of Cayman's finance has agreed to meet me.

'Jude Scott used to be CEO of the law firm in Ugland House.'

Hello, Jacques. Welcome. Come right in.

'Now he speaks for the whole of Cayman's finance industry.'

All these British brands with registered companies

here in Cayman, what are they doing here?

You know, it would depend on the individual company,

but, for example,

it can be circumstances where they're looking to do expansion...

-So you think they're...

-..and they're looking to raise funds.

They can also be companies that are

looking to expand their investment opportunities.

Are you really telling me with a straight face that

it isn't anything other than tax avoidance?

What I'm saying to you is it very much depends on particular

organisations as to the reasons why they're using the Cayman Islands.

Cayman has this reputation as being this place of massive tax avoidance

and President Obama actually pinpointed Cayman specifically.

Well, you know, it's fascinating, there are actually buildings

in the US, in Delaware, that house 110,000.

Delaware was a competitor, you know,

there are lots of other tax havens across the globe,

not just the Cayman Islands and so do you think, in a way,

a lot of these comments is because they are playing politics,

do you think?

I think quite often they're politically-motivated comments.

'Cayman is singled out by critics,

'but the truth is that it's competing with tax havens across the world.

'They hope a cleaner reputation will give them an edge over their rivals.'

Say I was a British viewer and I was watching this show

and I just felt really furious with the way these companies operate.

Many years ago, the question was, you know,

"Is there tax evasion taking place with a particular organisation?"

Tax evasion being black and white, it's either legal or not legal.

That discussion has now extended to, "Well, it may not be illegal,

"but is it unpatriotic?"

And that's where it becomes a very, very difficult question.

Well, as you could see, Jude is a pretty smooth defender

of his industry and of what goes on in this island.

He says that they're just sticking to the laws,

so maybe in order to get some answers,

I need to speak to the people who actually do make the laws.

The thing about Cayman is that it's got its own government and premier,

but it's also got a governor who's a British civil servant,

so who really calls the shots here?

Time for some phone bashing.

I'll start by trying to track down Cayman's premier,

a guy called Alden McLaughlin.

All right, that's brilliant, thanks.

So I've just found out that I've got a meeting

with the most important person on the island, the premier.

'But before I meet the big man, let me give you the lowdown.

'Cayman isn't a one-off. It's part of a global web of tax havens.

'The system here is clever, not criminal. It's all legal.

'At the last count in 2013,

'an NGO study found that 98 out of the top 100 firms

'on the UK stock exchange had companies in tax havens,

'though many of the companies we contacted told us

'they aren't using Cayman to avoid tax liabilities back home.'

Wow, that looks good. What are you cooking?

-Local lobster tails and vegetables.

-Wow, can I have some in a minute?

You must!

What we think of one firm is actually made

up of lots and lots of different companies.

Tesco told us it's had four Cayman subsidiaries. One, two, three, four.

National Grid told us it's had six. One, two, three, four, five, six.

BP has had eight.

Barclays has said they've had more than 100.

They've all told us it's not for tax advantage.

At the last count, those top 100 businesses on the UK stock exchange

between them had a whopping 8,000 tax haven registered companies.

Now, businesses may have registered companies in Cayman

for all sorts of reasons,

but some have pulled off some breathtaking creative accounting.

Take Facebook.

Facebook opened two companies in Dublin, Facebook Ireland Limited

and Facebook Ireland Holdings Limited.

Facebook Ireland Limited made £1.4 billion.

Thank you.

But then they got charged £1.4 billion, which would have been

unlucky if the company charging them hadn't also been owned by Facebook -

Facebook Holdings Limited.

After paying that, this company made no profit

and this company made a profit of £1.4 billion.

And this one's shareholders are other Facebook companies,

including one in the Cayman Islands.

But guess where the money went?

It went to tax-free...Cayman.

Mmm! That's good.

Facebook says the company

complies with all relevant corporate regulations.

Strategies like this are perfectly legal,

but because they're so shameless, they're also hush-hush.

In fact, Cayman's even got a law that means

I could be arrested for asking certain questions about business.

Just how serious are these laws?

I'm going to find out.

We're a financial centre,

so data protection and security

of people's private information is very, very high over here.

-Right, yeah.

-So it's not something they welcome,

people being intrusive with their banking affairs.

-Where are you from? You don't sound like you're from here.

-No, I'm from London.

So I've been here four years now. Love it.

Any retired cops in the UK, if you want to come to a beautiful island

on a tax-free salary, then come to Cayman.

So, a building with 20,000 companies,

a business that charges itself £1 billion,

and a place where you can't even ask about any of it.

But I keep being told that what happens on Cayman is above board.

I want to get to the bottom of it,

and I've been told there's a British journalist here

who used to work on the tabloids.

Surely if anyone knows, Paul will.

He's invited me on to his show.

I'm not too sure what to expect.

-Nice to meet you, Paul.

-You, too.

-And you are?

-Matt.

-Matt, nice to meet you.

Can I come and sit with you?

Turns out these days, this former News Of The World reporter

is more Gary Lineker than Jeremy Paxman.

On The Premier League Show tonight, we pick the best goal of the season.

Plus we have a real life

proper, professional, serious television journalist.

-So, are you an Arsenal fan?

-Mm.

-You work at the BBC?

-Indeed.

-And I've googled you -

-you do a bit of work on the Guardian.

-Mm.

-Do you have any friends?

-HE LAUGHS

Well, I hope so. I've got a few friends.

Why? What's wrong with the BBC? HE LAUGHS

Is the Guardian still going?

It is. Is the News Of The World still going, Paul?!

-Don't even go there.

-THEY LAUGH

-You think that this was accidental?

-It was a lucky toe-poke.

Lucky toe-poke. Now is the time to turn it over,

create the Jack Wilshere goal. Off you go.

So the ball's coming through, here we go. And look at this...

Ohhh, it didn't go in!

Enough of that. He's off. Thanks very much, stay tuned.

Next week, we're going to have a little bit more -

I'm sure we'll find something to talk about without him.

Now the cameras have stopped rolling,

I get to ask MY questions.

What do you boys do when you don't do this?

You're a journalist, Paul! I thought you'd be, like,

investigating all the banks and all that business.

-Do you not do that?

-There's nothing to investigate.

-Cayman's clean as a whistle.

-Is that right?

-Yeah.

Thankfully I haven't got the kind of money to know

much about that, or what's going on.

I thought that Paul was going to be an investigative journalist

and that he was here exposing or investigating

what's going on at Cayman, but it turns out

that he plays Subbuteo on a round table.

Why isn't Paul chasing the story?

-Cheers, guys.

-Cheers.

-Slainte.

-This is my home, and it's tiny.

-Yeah.

You know, you guys have experienced just walking around bars,

just going to the supermarkets, and everybody knows everybody.

So what do I want to do? Short-term gain?

Sorry, short-term gain, long-term loss?

Yeah, bang, look at me - I've exposed this, I've exposed that.

Bang, finished.

And I've seen it and done it, and if you like, I've retired.

I've retired to the Caribbean,

we're on the telly, talking about football.

It's loopholes, isn't it? You know, that's what people are doing here.

They're exploiting loopholes that are perfectly legal.

-There's a difference between tax avoidance and tax...

-Evasion.

Evasion. There's a huge difference. I mean, I'll take you

to a pillar box over there, and it's a postbox in a wall,

and that's Manchester United.

That's Manchester United.

I'll take you to another postbox in a wall,

and that's Facebook.

You know, but these guys

are not doing anything illegal.

You know, they're just using the system.

Paul's been pretty clear.

Companies here work within the law.

So now I need to go meet the man responsible for the law -

Cayman's premier.

How could he justify the way British businesses use his island?

Cayman has a reputation, rightly or wrongly,

around the world for being very secretive,

for never letting people in, you know, finding out.

But actually, I'm here. You've let me in.

So I'm wondering, why have you let me in to interview you?

Why have you opened your doors to me?

Well, I'm hoping to help dispel this...

this perception that somehow we have secrets to hide in Cayman.

If there are, I don't know anything about them.

We have tax exchange information agreements

with more than 80 countries in the world.

If you want to hide your tax, Cayman's not the place to come to.

It has been estimated that legal tax avoidance

keeps £20 billion out of the UK Treasury every year.

That's exactly the same amount being cut by government departments

delivering services to us in the next four years.

What would you say to British viewers whose public services

are being denigrated as a result

of companies putting their profits through Cayman?

Well, again, I think most of that is a misconception. But...

Well, where's the misconception

if literally they do not pay taxes in Britain

because they have routed their profits

through companies that are registered here?

The misconception is that whatever is due

in terms of taxes to the United Kingdom or any other country

is payable in those countries,

and they won't be allowed to

stash away ill-gotten gains here.

-Are you saying you're not a tax haven?

-We're not a tax haven at all.

-Not at all.

-Say the EU said, "Right, we need to shut this place down."

Who would then make the call? You, or would it be the UK government?

Ultimately the UK can, because they have the overriding responsibility.

Obviously the UK can, and have in the past, put pressure on us

to do various things.

So there is always a certain tension there.

Because in some respects, obviously,

the Cayman Islands is in competition with the City of London.

Interviewing the premier was basically experiencing

that pass the parcel of responsibility thing

that you get here. "Not really my problem, you know?"

Now we're getting to it.

The premier has made it clear it's the UK government, not him,

that has the final say on what happens on Cayman.

And if we want the profits and the tax revenue

that come through here to come to Britain instead

and pay for our teachers and nurses,

we need to deal with it.

So let's rewind and find out

how the whole thing happened.

It was Britain that turned Cayman into a tax haven in the first place.

Why on earth did they think it was a good idea?

There's a story told here about how in a shipwreck 200 years ago,

the people of Cayman saved a member of the royal family from drowning.

As a reward, the King said that Cayman would never be taxed.

It's a great story, but it's not true.

Britain did make Cayman a tax-free island -

not out of gratitude, but because they had a plan.

With the end of empire, British colonies faced a choice.

Many, like Jamaica, chose independence.

But Cayman opted to become a British dependency,

and our government had a new role for it.

Laws passed in the '60s,

when Marcus' grandfather was in charge,

made Cayman a fully-fledged tax haven

under British jurisdiction.

Countries like Switzerland had been doing this for years,

but now Britain was muscling in, and the hope was that our economy

would benefit from all this money sloshing through Cayman.

But it didn't.

And incredibly, neither did Cayman.

Because that £1.5 trillion banked here today

doesn't belong to the Cayman government.

It belongs to the corporations, the banks and the hedge funds

that use this place.

If shared out,

every person who lives here would have millions of pounds each.

But the reality is very different.

At the far end of the island is a town called Hell.

It's named after this weird, spiky rock formation,

and it's become a tourist attraction.

But the bit of Hell that the tourists don't see is just over there.

It's the poor side of Cayman.

I want to find out what life is like there.

Because Cayman is an island of great inequality,

something many are worried about back in Britain.

Emily is a 67-year-old retired civil servant.

She worked hard for 40 years to provide for her family.

Emily, I'm Jacques.

'Her daughter and three grandchildren live with her.

'But they're about to become homeless.'

-May I come in?

-Yes, sir.

Emily's pension no longer covers her mortgage,

so they're all being evicted.

Following a hurricane, the house is barely habitable,

but they have nowhere else to go.

Been from high...

Oh, my goodness, yeah.

So the ceiling must have collapsed.

-Did the ceiling collapse here?

-Yes, sir.

-Right.

'It's so damp you can hardly breathe.'

So that's pretty bad mould, isn't it, there?

Yes, and every time you clean it, it comes right back.

Yeah, of course.

-And the ceiling looks like it's kind of bowing as well.

-Yes.

-So is the roof...

-The roof is leaking.

-The roof is leaking, yeah.

And for this, her mortgage repayments

are £1,500 a month -

more than twice what the average British family pays.

I mean, are there no social services here to look after...?

-Yeah, but they...

-I mean, can they not rehouse?

Surely, you've got two kids with asthma,

you've got mould in this house like this...

They don't give a damn.

The prices for everyday things - for food, for transport and so on -

-are high here, aren't they?

-Yes, sir.

-Yes.

And that's how the government raises its money,

by having those taxes high.

But they don't make the big companies pay tax.

So is it fair, do you think? Is it a good system,

where they're raising the taxes by keeping

the prices of food and so on high?

-Does that work?

-No.

-No, it doesn't. No.

-It doesn't work?

Not for a poorer class of people, it doesn't work.

And Cayman is the fifth richest country in all the world,

and you're going to tell me

that they're so poor that they can't help?

At least I've got a little bed that I can sleep in, right?

I know, Emily. I know.

-This island has £1.5 trillion coming through it.

-Right.

-Yes.

And you've got damp on your walls and mould on your walls.

Are people angry here? You know, do they have a voice?

-Is there any...

-No.

-No, we don't.

-We don't have a voice.

And then they tell you, "Oh, Cayman, it doesn't want to work."

What could they do?

What could the government do to make your life better?

Help you better, sir.

The life that Emily and her daughter are living here in this house

is the life that any family living in poverty in Britain is living.

The difference being that in Britain, we have a welfare state.

We have a safety net.

They don't have one here - they have charity.

I said to Emily,

"What could the government do to sort out this situation?"

She said, as a joke, "They could give us £1 million."

Well, guess what? They actually could give them £1 million.

They could give them £27 million each,

every person on this island, because that's what this island is worth.

£1.5 trillion.

But actually, guess what? They can't give that money to Emily,

because the money is sealed off.

It's in the financial sector.

It belongs to the banks and the corporations.

The government don't have access to it.

How is this allowed to happen?

It's not as though all this money that comes to this island

benefits your island. You know,

I met a woman who basically is having her house repossessed by a bank,

and these banks are helping the companies that come here get richer.

I mean, don't you feel ashamed about that?

This is a citizen of your country.

Well...

I'm not sure you can point to any country in the world

which has a system which prevents

houses from being repossessed

if the mortgage isn't being paid.

That's a commercial reality.

Not everyone is able to pull themselves up.

You know, that's why we have a safety net in Britain,

-we have a welfare state.

-But everything comes at a price.

So if you want a welfare state, you're going to have to pay for it.

The Cayman Islands government doesn't have to impose

such a huge tax burden

because of all of these other services

that are provided by charitable organisations.

Cayman doesn't have any corporation tax,

and relies on charities to provide services.

Is this relevant to Britain?

Gordon Brown sliced 5% off our corporation tax,

and by the end of this Parliament,

George Osborne will have cut it by a further 10%.

Whatever you think about the benefits this could bring,

it's also the biggest reduction in the funding of our services

through taxes on business in British history.

And it's charities that may end up plugging the gap,

just as they do on Cayman.

So what could the Cayman model mean for us in Britain?

Washington, DC analyst Matt Gardner says our government

and all of us as consumers need to think carefully

before heading down this road.

So I mean, it's shocking where we are, just here,

because what you have is a law firm, you have banks

and you've got government,

and actually where we're standing here is poverty-stricken.

And that sounds as clear a signal as you could want

that the economic model the Caymans are pursuing here

is an economic model that isn't having

any positive impact on its citizens.

The heart of our social contract is tax revenues,

is having a tax base that is enough to pay for the services

we all need, the things we can't provide for ourselves.

That's education, that's health care,

that's a transportation system.

And when you undermine the tax system in this way,

that pretty much makes it impossible,

in the long run, to provide these services.

So we have a clear choice as consumers.

We have a choice between a cheaper package

or a school or a hospital that functions better, and actually,

the two are directly connected, because it is about tax.

It's very easy for us as individuals, as consumers,

to focus narrowly on the little benefit we get

from buying cheap packages from Amazon right now.

But we have no way of evaluating or foreseeing the long-term impact

it's going to have on services,

on ourselves and our own tax load,

and I think that's the way these companies like it.

So the lesson that countries like Britain

can learn from a place like Cayman,

where they have an economic system in place,

you know - companies with very low tax,

a disappearing, diminishing safety net for the poor

and for the squeezed middle. That is the model,

and do you think that's a model that Britain should be pursuing?

I don't think it's a model anyone can pursue.

You know, you can't compete with zero. If the UK...

If developed democracies decide

that this is the economic model they want to pursue,

I think they're going to be disappointed pretty fast.

On Cayman, as in Britain, the super-rich

and the poor live on one small island.

What Emily spends on her monthly mortgage -

or would, if she had the money - some people here spend on a haircut.

And I'm about to meet the man who flies in from Los Angeles to do them.

-One thing about here, people are very easy going.

-Yeah, right.

Very easy going. There's, like, an energy here.

As soon as people land, they're like, "Oh, relax."

I think it's the not wearing underwear, maybe. I don't know.

-HE LAUGHS

-Sorry!

-Speak for yourself!

-I got here, like, yesterday.

-Yeah.

I was in Los Angeles, actually in wine country,

did this big wedding, it was great.

And I had a very exclusive clientele there, she's an actress.

And then I thought, OK, let's get that done, and got on the plane,

and like I do every three to four weeks,

I'm here to cater to 30 to 40 women

every four to five weeks.

What's beautiful about the Cayman Islands is you've got a mix

of all these Europeans that live here very periodically,

or they live here part-time. And then I follow them.

They tell me, "Look, Pasquale, I need you in St Tropez, Paris,"

and then we'll go there.

I was a Miss Cayman Islands, right? And when I competed,

he flew down to do my hair backstage for the show.

And ever since then, I mean...

Would you say, if you could sum up what Cayman is in one word,

what would it be? What's the first word that comes to mind?

First thing comes to mind with the Cayman Islands is...

You know, I always say, as beautiful as the ocean as the people you meet.

Yeah. That's not one word.

-Not one word.

-I want one word.

-One word. Um, beautiful people.

-That's two words.

-Uh...

-Decadence.

-That's one word! HE LAUGHS

Decadence, there you go.

Come on down, my lovely.

Boy, it took you a long time to grow this.

Ooooh, hello. Salud.

Como estas? Bien?

-Let's do it.

-OK, so would you...

-Are you OK about going in?

-Yeah, yeah.

-So I take my shoes off?

-Yeah, get your kit off.

Isn't this good living? This is life!

It's like, welcome to the Cayman Islands,

and you feel like there's a little guy going,

"The plane, the plane, boss, the plane!"

-You get right in between them.

-Yeah, absolutely.

Girls, can we turn to Jacques,

and kind of, like, lean on him a little bit?

-Yes, yes!

-Great.

Stick your hands in your pockets.

Awesome. As you walk in, be chatting,

-take the glasses off.

-OK.

And be smiling.

While the jet-set has money to spend on champagne,

the government here hasn't got cash for its schools.

The island's education budget ran out of money

after building a new high school.

When Cayman opened its new hospital, guess what?

The cash didn't come from the government,

but from an Indian multimillionaire philanthropist.

And it's a moneymaking business venture.

Locals can use it, but it's primarily aimed

at American health tourists.

I'm going to meet someone with a unique insight

into how this relationship between government and business works,

and what it could mean for us.

He grew up in Emily's world,

but made it into Pasquale's.

I'm meeting Mario Rankin,

who grew up in a down-and-out part of the island.

I grew up playing here, living here...

This is where I lived the better part of my life,

until I became a young adult and then I moved out.

Yeah, and then, also, you became quite successful, didn't you?

Well, the thing is, is that this was a great motivator.

When I used to walk to school in the mornings,

I would stop at every plum tree on the way to school.

I would pick plums and I would fill my bag up with plums

because I know the kids in school,

a lot of them didn't live in the neighbourhoods that had plums,

and they would spend all their lunch money on plums.

So, I would go to school with a bag of plums

and come home with a bag of money.

Yeah, every plum season.

So, you were a born businessman, basically?

Well, I think I had a knack for business

from a very young age, I agree with that.

-You spotted something after the hurricane, didn't you?

-Yeah.

It was Hurricane Ivan that took place.

Beneath all of that debris and headache, and hardship,

there was a silver lining

because it created a lot of work -

on the clean-up aspect of it, right?

There was a lot of scrap metal that was accumulated,

so I made a contact in China and told them,

"Look, you know, if you guys would give me

"a power purchase agreement

"saying that you would buy X amount of metal,

"maybe I can convince the government

"to give me the contract to remove this metal."

How much did you make on that one deal?

Like 4.5 million CI dollars.

So, you didn't do bad for a boy who came from this yard.

-4.5 million deal upfront...

-Upfront.

..and you're in business, literally.

Mario is now a construction magnate

and one of the richest men on the island.

He built the road we're driving on

and he's got a very clear message about what it means

when the rich, not the state,

pay for things.

Does government here...?

Does it work on behalf of the people

or the super-rich?

They're supposed to work for the best interest of the people but -

from what I've seen in my time living here, as a kid growing up -

I've seen that they've worked in the best interest

of those who have money to invest

and that we've catered far too much

for the super-rich and the wealthy to develop.

You must be in a funny position

because as, kind of, construction king,

you... Obviously, you benefit from creating this

but, at the same time, the island is changing, isn't it?

At some point, we're going to out-resource ourselves,

meaning that we're going to turn everything over to major development

and the super-rich,

and everything is going to be far outpriced for the local person

that comes two generations behind.

You guys are on the heels of major development coming in

and I think what's going to really happen in Britain

is that you guys are going to have, like, a social unrest

because people there are a lot different from the people here.

We live with the trade wind breezes where we're a lot more complacent,

we're a little bit more relaxed and

we take a lot before we break.

Maybe in Britain, it's a little different.

Mario's giving us a very clear warning in Britain.

If we rely on the super-rich and big business to pay for everything,

we're letting them buy our future.

We're all used to the idea that tax havens, like Cayman,

are the problem, the bad guys,

but in my time here and the conversations I've had,

I've realised that it's far more interesting

and unexpected than I'd imagined.

Cayman isn't a remote island,

it has lessons for us in the UK.

We made this island a tax haven

and it's still umbilically linked to Britain -

so if the buck stops with one person here,

it's Britain's representative on Cayman - the governor.

Surely she can give me some answers.

-Welcome to Government House.

-Thank you very much.

Are you worried about this programme

and about what we're going to say about Cayman?

It's all very easy, isn't it,

to go around and take a few photographs

of people's very fast cars and beautiful houses?

I think people imagine the Cayman Islands as

having lots and lots of banks

and people wearing dark glasses with briefcases,

sort of scurrying around.

We're not saying there's no corruption here

cos obviously that would be stupid,

but there is an absolute commitment that,

when any corruption is discovered -

and it's actively looked for -

then it will be prosecuted.

It's kind of ironic that you have this reputation.

Reputations, you know,

as they say, are sort of...

difficult to make but easily broken,

which is one of the reasons why the government here

are so keen to make sure that they

really keep ahead on this agenda.

How does Britain benefit from Cayman having this kind of status

as a hub for financial services and so on?

How do British people benefit from it?

Well, I think the financial services industry in Cayman

enables Cayman to be totally self-sufficient.

Some other overseas territories

are reliant on support from Britain

because their economy simply isn't big enough.

So, Britain benefits by not subsidising Cayman?

That's how... That's the benefit to the British public?

Yes.

Is there a cost to the British public

with this status that Cayman has, do you think?

With companies coming through here,

is there any cost to the British public?

In terms of...

You know, we've talked to people

who've said that the direct cost

to the British public is that...

we have public services that can't afford to run any more

because we don't receive the tax revenue from those companies.

Yeah, but that's nothing to do with

the availability of low tax jurisdictions,

that's to do with what the tax laws are

in the country that you're talking about.

Hmm.

So, why would they say that then?

Why would someone say there's a direct cost to the British public

if that's not true?

What people are doing is...

..moving money

to places that have low taxes...

..and registering their profits there,

but you can have laws in the country

where the profits arise

that prevent them doing that.

So, that's what would...

That's what would improve that situation for the British public.

Would the British government be able to

close down Cayman if they wanted to?

No.

Why not?

It's the British government's responsibility, isn't it?

Yes, it's a British government's responsibility

but the British government couldn't close down...

-You know.

-Why not? I don't understand why not.

-..the financial services industry in Britain.

-Why not?

Isn't Britain...?

The premier told me that Britain has ultimate veto over everything.

It's the British government's responsibility. That's the premier.

They're supposedly in charge.

No, no, of course the British government

does have ultimate veto over...

..what goes on in the island,

but only if it's illegal or damaging

to the interests of the people or to the island.

Do you think companies being able to register their profits through Cayman

is not a good enough reason

to do something?

The only way of addressing that properly

is to change the tax laws in Britain.

Cayman is a tax haven

created by Britain...

The foreign affairs said,

"You're going to the Cayman Islands."

..but it's much more than that.

It's a perfect creation of the global financial system,

floating beyond the reach of any one government.

The Cayman Islands is in competition with the City of London.

Places like Cayman aren't a parallel economy,

they're how the world does business and

as consumers, we're part of it, too.

We buy cheap goods from companies that use tax havens,

but the cost to us could be much, much greater.

We're going to turn everything over to major development

and the super-rich and I think

what's going to really happen in Britain

is that you guys are going to have, like, a social unrest.

Cayman isn't a faraway island

with little to do with us.

Being here, I've realised

that Britain could look more like this a few years down the line.

This could be the future for all of us, just without the sun.