Cayman news: Automatic tax information exchange compared to “war of terror upon taxpayers”

An article in the Cayman Financial Review with the title “From Tax Treaties to Terror” warns of the consequences of automatic tax information exchange between jurisdictions.

Selected quotes:

– “…there has been an aggressive OECD-led campaign to rip up standard norms of international law and basic sovereignty, such as the rule that no country enforces another’s taxes. The object has been to force, shame, intimidate or bribe small offshore financial centers into becoming assistant tax informers or collectors for the large OECD countries. ”

– “However, things are about to take a quantum leap. OECD countries, spurred on by the U.S. Foreign Account Tax Compliance Act (FATCA), are demanding that all countries, including offshore financial centers, join in automatic data exchange (read “handover”) of all financial account information of all non-residents in any jurisdiction.”

– “No one has asked what will be the liability and responsibility of a government when that information handed over is stolen or leaked and we start seeing identity theft, fraud and kidnapping of children of expatriates (British, American, European, Australian and others) whose financial data has fallen into criminal hands.”

– “We are now seeing a war of terror upon taxpayers where they cannot be secure about their lives or physical safety as they contemplate the horrible thought that their private financial affairs will end up, via automatic data handover, falling into the hands of criminals, such as kidnappers and extortionists.”

It concludes:

– “Unless tight legal controls and remedies are used to rein in rampant tax bureaucracies and automatic data handover, it is obvious that hundreds of thousands, even millions, of affluent people in Western countries will be forced to seek the assistance of lawyers to create anonymous wealth-holding structures, not to avoid tax, but merely to secure the privacy and security as basic human rights to which they should be entitled as a matter of course.”

The full article is here.

For more balanced analysis of the OECD’s tax information exchange framework please see the Tax Justice Network here and Global Financial Integrity here.

For an overview of the multiple links between tax abuse, human rights and poverty please see the International Bar Association here.

As for hard evidence of links between automatic tax information exchange and kidnapping : there doesn’t seem to be much. A literature search brings up this book called “Global Tax Revolution” co-authored by Daniel Mitchell of the Cato Institute (who is also on the editorial board of the Cayman Financial Review). The main mentions of kidnapping risk in the book include:

– “Corruption in Venezuela’s tax office creates the possibility that an entrepreneur’s financial profile will be sold to thugs who will kidnap his daughter and cut off her ears or fingers unless the businessman pays a ransom” on page 178


– “…affluent tax payers in at least one major OECD member country also fear that tax data is routinely sold to criminal gangs seeking targets for kidnapping” on page 183.

A hypothetical (if dramatic) situation and what seem to be the results of an opinion survey carried out in a single OECD country (google books skips the relevant citation page); neither is exactly conclusive evidence to support claims of increased kidnapping risk due to sharing of tax information between national authorities. If there are other sources of evidence they are certainly not easy to find online.

The Cayman Islands are ranked fourth on the Financial Secrecy Index.


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