:00:00. > :00:08.be no object in dealing with the floods. 24 serious flood warnings
:00:09. > :00:26.are in place. Now it is time for Hard Talk. Welcome to Hard Talk. I
:00:27. > :00:39.am Stephen Sackur. Sun, sand and sea. The Cayman Islands is one of
:00:40. > :00:47.the most tax havens. That is now the US is putting pressure on the Cayman
:00:48. > :00:57.Islands. My guess today is Alden McLaughlin. -- guest. Is the Cayman
:00:58. > :01:28.Islands about to lose its allure? Alden McLaughlin, welcome to Hard
:01:29. > :01:33.Talk. Would you agree that you oversee one of the strangest and
:01:34. > :01:44.most unbalanced micro- economies in the world? I would not say the
:01:45. > :01:59.strangest. We have had a success story. Why would you say that? We
:02:00. > :02:18.have, from a hard scrabble existence. Is used to be only able
:02:19. > :02:22.to work in the land or the sea. You have nearly 12,000 mutual funds that
:02:23. > :02:32.called the Cayman Islands their home. You have fewer than 62,000
:02:33. > :02:47.people. I think it is strange. I think it is bizarre. I would never
:02:48. > :02:53.use those words. It is due to the vision of the people of our country
:02:54. > :03:08.to building something new. I think it is testament to people wanting to
:03:09. > :03:15.pay as little tax as possible. I wouldn't say that that wasn't the
:03:16. > :03:22.genesis of it. That is not the case now. We have had an immense amount
:03:23. > :03:33.of change over the last 20 years, the whole world. There aren't real
:03:34. > :03:41.places to dodge tax. You must be aware of the building that you have
:03:42. > :03:49.that President Obama mentioned recently. Is it true that the right
:03:50. > :04:00.18,000 businesses registered to that building? It is true that they are
:04:01. > :04:08.registered there. How many people physically work there out of that
:04:09. > :04:22.building? They might not have a physical presence. It is a law
:04:23. > :04:32.office. They operate registered companies. I want to talk about what
:04:33. > :04:42.President Obama said. He said it is either the biggest building on Earth
:04:43. > :04:58.or it is the biggest tax scam. It is neither. There is a place in
:04:59. > :05:07.Delaware where there are 255,000 companies registered. We have on
:05:08. > :05:15.record all the registered owners. The difference with us is that we
:05:16. > :05:19.have 33 bilateral tax information exchange arrangements with all the
:05:20. > :05:27.major trading nations in the world. That includes the United States and
:05:28. > :05:33.the United Kingdom. We will get to that later. We don't want to lose
:05:34. > :05:41.the discussion we are having about the reality of the Cayman Islands.
:05:42. > :05:48.You can talk about Delaware. It is true that there are tax evasion, tax
:05:49. > :06:00.avoidance, call it what you will. Let me just get back to you. You
:06:01. > :06:08.have such a small territory. There are fewer than 65,000 people. The
:06:09. > :06:13.danger is that it is being used by powerful forces beyond your
:06:14. > :06:27.control. You cannot control them or regulate them. You cannot stop them
:06:28. > :06:33.in a crisis. I do not agree. We are an open jurisdiction. 33 countries
:06:34. > :06:40.have signed on to this bilateral tax agreement. We have been grilled and
:06:41. > :06:54.examined and scrutinised by all the agencies. The US Department of
:06:55. > :07:00.Justice, the OECD, many bodies, they all say that we are one of the best
:07:01. > :07:07.systems in the world. We have strong regulations on laundering. We are in
:07:08. > :07:17.many respects ahead of the United Kingdom, especially in terms of how
:07:18. > :07:28.beneficial ownership is concerned. We have all the records. The city of
:07:29. > :07:43.London cannot say that. I will get to that in a minute. You say that
:07:44. > :07:52.you and -- are not a tax haven. Clearly you are. People put their
:07:53. > :07:58.business there because they can minimise the global tax that they
:07:59. > :08:10.pay. They can do that East on what happens in your territory. You think
:08:11. > :08:23.that is ethically right? It is not right for people not to pay tax in
:08:24. > :08:29.the area where they are from. What is missing from this dialogue is an
:08:30. > :08:38.appreciation that the Cayman Islands has never had direct taxation. The
:08:39. > :08:50.benefit to business and Cayman Islands is that we are tax neutral.
:08:51. > :09:06.Any tax liable in the home jurisdiction is paid on -- in the
:09:07. > :09:10.jurisdiction. We have a framework where no one who wants to hide from
:09:11. > :09:16.authorities about paying tax is going to come to the Cayman Islands.
:09:17. > :09:28.We will give their home jurisdiction the information. The political
:09:29. > :09:32.climate has changed. Many wealthy individuals and large businesses are
:09:33. > :09:42.minimising their tax that they pay. They are using financial vehicles
:09:43. > :09:46.based on your territory. I want to talk you about what a leading
:09:47. > :09:55.economist said. They said that we need to change international law so
:09:56. > :10:00.that channelling funds through these offshore jurisdictions, like yours,
:10:01. > :10:14.it is no longer possible. Due agree that that should happen? -- do you.
:10:15. > :10:25.That. The lifeblood of your country will be stopped. People do not go to
:10:26. > :10:36.your country because of the sun and the sea and surf. That is a
:10:37. > :10:46.misconception. Let me give you an example. Let's say you have a
:10:47. > :10:59.factory in the UK that manufactures cars. The factory goes to the bank
:11:00. > :11:05.in London to borrow money. Much of that money is raised in an
:11:06. > :11:13.international financial centre. We have a tax neutral platform. One
:11:14. > :11:17.we're talking about huge sums of money, it allows participants from
:11:18. > :11:35.all over the world to be able to pull the money into one of these
:11:36. > :11:48.funds. -- pool. You can put it in those terms, but with such a small
:11:49. > :11:59.population, you have assets worth $1.5 trillion. It makes it look like
:12:00. > :12:13.the responsible economics in Iceland have been a tea party. Let's look at
:12:14. > :12:34.the scandals and scams. It was not offshore. It was Enron. In Iceland,
:12:35. > :12:48.it grew out of any proportion to the economy. Let's not speculate. Let's
:12:49. > :12:57.talk about Enron. Let's talk about last week and the Royal Bank of
:12:58. > :13:03.Scotland. One of the big mistakes is targeting and scapegoating the
:13:04. > :13:13.international financial centres. Cayman Islands is better regulated
:13:14. > :13:22.than many onshore jurisdictions. You keep telling me that you are well
:13:23. > :13:33.regulated. You are listed as in the top five most secretive financial
:13:34. > :13:40.centres. That is by a group that spent all their time looking at
:13:41. > :13:46.transparency and accountability. They do not like what they see. I
:13:47. > :14:02.will frame from saying anything negative by them. -- refrain.
:14:03. > :14:07.The Guildford apartment just as in the US says. Those of the report
:14:08. > :14:14.that matter. You are happy to say that US reports matter. The
:14:15. > :14:19.anti-crime programme looked at the Cayman Islands. They lifted its
:14:20. > :14:26.commitments to sorting out financial wrongdoing. -- looked at. An
:14:27. > :14:28.official asked, how many convictions for money-laundering have there been
:14:29. > :14:33.in the Cayman Islands in the past six years? Since 2006, he could only
:14:34. > :14:38.come up with six, just six convictions. Does it suggest that
:14:39. > :14:44.your commitment to sorting out financial wrongdoing is very deep?
:14:45. > :14:50.It is very deep. I am not sure when that statement was made, I am not
:14:51. > :14:59.sure who the individual was. It was from the spring of 213, less than
:15:00. > :15:04.one year ago. -- 2013. Will turn to the force says about the Cayman
:15:05. > :15:15.Islands. They did a peer-review and cannot with 49 recommendations. We
:15:16. > :15:21.are in the second level, along with the UK, US, Germany and France. When
:15:22. > :15:27.you dig into the report, you find that actually, we are further rate
:15:28. > :15:34.had certainly when it comes to collection of information, and the
:15:35. > :15:38.ability to say, who are the beneficial owners of various
:15:39. > :15:42.entities in the Cayman Islands. So you are now committing to absolute
:15:43. > :15:48.revelation that all the beneficial owners of assets in Caymans, how
:15:49. > :15:57.will the complicated the investment vehicles we see in your territory,
:15:58. > :16:01.you are going to ensure that the beneficial owners, the people who
:16:02. > :16:09.really knows assets, are rated to fight? I said this the show, we have
:16:10. > :16:16.had in place requiring that records in regards to beneficial ownership
:16:17. > :16:24.in Cayman Islands is kept for ten years. Is it published? Is it
:16:25. > :16:30.accessible to people outside world who want to know all those
:16:31. > :16:38.investment vehicles on inside your country, will be able to find out? I
:16:39. > :16:44.do not know of any country wear it does happen like that. We are moving
:16:45. > :16:47.in that direction in the UK. We will identify beneficial owners of
:16:48. > :16:54.discretionary trusts. The Cayman Islands muster the same. Will you?
:16:55. > :17:00.Let me put it this way. He wants an answer. David Cameron monster that
:17:01. > :17:08.she will put your house in order. -- wants to know that you will put your
:17:09. > :17:14.house in order. They want to know that you will take the steps. Arrow
:17:15. > :17:19.house is in better order than the UK in respect to beneficial ownership.
:17:20. > :17:25.We have had the legislation in place that records had to be kept for ten
:17:26. > :17:29.years. We are in dialogue with the UK about the move to a public
:17:30. > :17:35.registry, the proposal to move to a public registry. We have just
:17:36. > :17:43.undertaken in the consultation process. We have extended for
:17:44. > :17:46.another month. Her Majesty 's Treasury wishes to come and look at
:17:47. > :17:54.what has happened and talked what about the way forward. Let me put it
:17:55. > :18:00.this way, as the premiere of the Cayman Islands, I have no
:18:01. > :18:06.difficulty, and the government has no difficulty, in complying with the
:18:07. > :18:11.international standards. If the international standards are that
:18:12. > :18:16.they ought to be public registers for these matters, we are more than
:18:17. > :18:24.happy to comply. We have led the charge as part of the OECD global
:18:25. > :18:30.Forum. But you are saying that you will not be a leader? The former
:18:31. > :18:34.chairman of the Caymans military authority has warned that if you
:18:35. > :18:38.provide a public registry of beneficial owners of these vehicles
:18:39. > :18:44.and discretionary trust, he could make the Cayman Islands
:18:45. > :18:52.uncompetitive. Are you worried that you could be about to lose what has
:18:53. > :18:56.major successful? We have faced challenges were several years.
:18:57. > :19:02.Transparency has become more and more the culture. You have been
:19:03. > :19:10.under enormous pressure. We have led the charge in changing the
:19:11. > :19:15.standards. He reason other little bit but I think is important. As we
:19:16. > :19:22.have become more transparent, as regulation has improved, our
:19:23. > :19:24.business has improved. Legitimate business wants to be in
:19:25. > :19:30.jurisdictions that are well regulated and transparent. That is a
:19:31. > :19:39.ringing declaration. Why don't we make one more right now, thus far,
:19:40. > :19:44.you have many great deal of it, you have signed deals with the UK and US
:19:45. > :19:50.that require automatic exchange on bank accounts, financial accounts,
:19:51. > :19:57.held in the Cayman Islands. There are 33 other jurisdictions. For the
:19:58. > :20:04.other 33, it is not automatic. You wait for a request. Everybody who
:20:05. > :20:08.has studied these matters say it is only when it is automatic that she
:20:09. > :20:16.really got the transparency necessary. AFL that will be the new
:20:17. > :20:25.global standard. When you sign these deals with other nations, why are
:20:26. > :20:31.you not putting in that clause? We mirror the other holy city countries
:20:32. > :20:36.that are signing up to these. These are standard fare. When the global
:20:37. > :20:46.standard moves, are standard fare. When the global
:20:47. > :20:50.have made it clear. George Osborne said, if you want to tackle tax
:20:51. > :20:56.evasion, this information has to be provided automatically. With Russia,
:20:57. > :21:02.China, other key emerging markets where there are rich individuals,
:21:03. > :21:05.why not insure that you automatically feed that information
:21:06. > :21:15.back to the host government? The bigger question is, why aren't all
:21:16. > :21:20.the other big countries enact their standard? That is where the standard
:21:21. > :21:30.is moving. We have no objection to doing this. The point able to make
:21:31. > :21:36.use, this thing called regular Tory arbitrageurs. When one group of
:21:37. > :21:43.nations tighten the rules and make regulation tougher. Others do not.
:21:44. > :21:50.What you think happens to business? It migrates to way there is less
:21:51. > :21:56.regulation. So you are worried that she will lose out to compatibles?
:21:57. > :22:05.This is the point I made. Finance is global. This is not just about your
:22:06. > :22:09.competitive place, it is about morals and ethics. Shouldn't you be
:22:10. > :22:17.sending a signal that this kind of tax evasion practice we have seen
:22:18. > :22:20.for so long, has to end. Are you seriously suggesting that a nation
:22:21. > :22:27.of 60,000 people ought to be the moral arbiter for the world? Iron
:22:28. > :22:34.suggesting that a nation that posts $1.5 trillion of assets can send a
:22:35. > :22:37.strong signal. What we need is to have the same signal being repeated
:22:38. > :22:45.right across the world, across the G8 nations, the G 20 nations, and
:22:46. > :22:50.the US. A final thought, this is about politics. You are the Premier,
:22:51. > :22:55.you still have to bow to the rule of Britain. David Cameron is putting
:22:56. > :23:00.pressure on you on everything from austerity programmes to demand and
:23:01. > :23:04.that you come up with tougher regulation of the tax haven. Are you
:23:05. > :23:13.getting sick of being told what to do by Britain? No, actually. You are
:23:14. > :23:18.quite happy? The relationship we have is quite good. There are
:23:19. > :23:24.tensions from time to time, there are tensions in every relationship.
:23:25. > :23:30.We value our constitutional link with the UK. While there may be one
:23:31. > :23:35.or two match to waive the independence flag, by and large, the
:23:36. > :23:38.country did not want independence. When you set the Cayman Islands has
:23:39. > :23:45.been scapegoated, you would not thinking of the British government?
:23:46. > :23:49.I was not, I was not pointing at any particular country. The perception
:23:50. > :23:56.that has been put forward that the Cayman Islands a rate tax haven in
:23:57. > :24:01.which resides billions of dollars that nobody knows the ownership of,
:24:02. > :24:07.that it is a haven for tax cheats and a launderers, that is what I am
:24:08. > :24:21.putting about. Talking about it that way, while disregarding. So you are
:24:22. > :24:26.committed to remaining a financial centre? Yes. We have two and they.
:24:27. > :24:53.Thank you. It is not good news. There is more
:24:54. > :24:57.unwelcome rain on the way and some severe wind gusts as well. A look of
:24:58. > :25:02.it satellite picture for those of us overnight, we will be keeping in
:25:03. > :25:05.close eye on the system. This developing area of cloud has a
:25:06. > :25:10.deepening low pressure system which is set to bring some nasty
:25:11. > :25:11.conditions to many of us. Over the next couple of