US reaps big money from Cayman
The Cayman Islands is the biggest source of funds from the Caribbean invested into the United States, with trillions of dollars pumped into the economy through the jurisdiction.
This was revealed by US economist Daniel Mitchell, who was one of the speakers at the Cayman Business Outlook forum held at the Ritz-Carlton, Grand Cayman on 24 January.
According to Mr Mitchell two trillion dollars have moved into the United States economy thanks to the Cayman Islands.
Mr Mitchell cited the Treasury Department’s international accounts, which shows the source of money from each region. “Under the Caribbean, which is primarily the Cayman Islands, there is two trillion dollars going to the US economy,” he said.
He noted that the Cayman Islands provides the biggest economic platform in the Caribbean and the chief source of international finance that goes to the United States of America.
He said that contrary to popular belief, the Cayman Islands has done more for the United States economy than the latter has done for this islands.
“Now that money is in America creating jobs, helping the American financial system, strengthening our financial sector, putting new money into our stock market, and the Cayman Islands, since it has a good tax neutral system, is a platform for foreigners around the world to invest in the US economy. That is very beneficial for America,” he told Cayman Net News in an exclusive interview.
He said that this was a reality that US politicians ignore conveniently, so that they can browbeat the Cayman Islands.
“Most politicians who think they know Cayman have read a John Grisham book and watched a movie and they think that in the Cayman Islands is where all the drug money is.
“All the drug money is in New York banks; it does not come to the Cayman Islands. But politicians just don’t think about this; all they think about is what to say to get elected, and whether it is true or not it does not matter to them.”
Mr Mitchell, who is a top expert on tax reform and supply-side tax policy and a strong advocate of a flat tax and international tax competition, said that both the US and Cayman governments put a cap on expenditure. He noted that the Cayman government should not grow more than the private sector and it was not fair that the civil service was the largest employer in the Cayman Islands. He said greater investment should be encouraged, since the civil service is so big.
“Business must grow at a fast rate than government, for there to be sustainable growth,” he told Cayman Net News.
He said that for any government to guarantee prosperity, it must spend less than its revenue.
Mr Mitchell said that because the United States government was out to spend more money on welfare, the country was looking at new areas where it could maximize taxes and that is where the Cayman Islands comes in.
He said that any passage of law that was bad for the Cayman Islands was also bad for the United States.
“Politicians don’t think of consequences; they are like a two-year-old child who sees a cookie and says, I want I want; give me the cookie. They think that the Cayman Islands is a cookie of tax revenue, and that leads them to pass laws without thinking,” he told Cayman Net News.
As long as the government in the United States keeps getting bigger, these politicians will always think that the Cayman Islands is a pot of gold at the end of the rainbow. They are wrong. They don’t understand that the Cayman Islands is tax compliant and is in harmony with the US law,” Mr Mitchell emphasised.
However Mr Mitchell noted that the Foreign Account Tax Compliance Act (FATCA), which was recently implemented, will not affect the Cayman Islands adversely because the country has been tax compliant.
According to the US Internal Revenue Service, under FATCA, US taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting will be made on Form 8938, which taxpayers attach to their federal income tax return, starting this tax filing.