Examination of Witnesses (Questions 100
- 119)
MONDAY 15 DECEMBER 1997
SIR JOHN
KERR, KCMG, MR
PETER WESTMACOTT,
LVO, MR JOHN
KERBY, and MR
LEE BEAUMONT
MR JAMIE
MORTIMER
100. But we actually have some residual
powers in these islands, do we not?
(Sir John Kerr) Yes, of course we do.
101. So why go to the EC to do what we might
be able to do ourselves?
(Sir John Kerr) The question of whether and to
what extent Mr Monti's tax package applies in the Dependent Territories
is a question that will need to be explored. Your question is
a very fair one: should we be insisting that they go for much
higher levels of tax in order to get rid of the possibility that
some people who run their company out of the Caymans or BVI or
keep their money there are crooks or are doing it to evade taxes?
I think my answer has to be no, we have to clean up the act, we
have to give proper reporting systems, we have to have proper
regulation, but I am not sure that we need insist that they introduce
very high tax rates. Do we do that for the Isle of Man? Do we
do that for the Channel Islands? Why should we be doing it particularly
for the Cayman Islands? The money in question in the Cayman Islands,
the taxes not being paid, if I follow your drift correctly, would
actually mainly be American taxes in the Cayman Islands. Now,
of course if it was evasion, it is a crime whoever's taxes were
being evaded, but I do not think you can assume that it is evasion.
102. I think your answer to my question
is no. If you look at the bottom of the appendix 1 on page 43,
in relation to the Turks and Caicos, it is the only one where
the under "Governor's responsibilities" you actually
list financial services. Financial services are listed in the
economies for all the others, but it is only in the Turks and
Caicos that financial services are listed as the Governor's responsibilities.
Is that an oversight or is it a reality that it is an exception?
(Sir John Kerr) I cannot explain that. I am not
the author of it. [3]
103. But you are only the man in charge.
(Sir John Kerr) No, this is not my Report, sir;
this is the Comptroller's Report.
104. But you did agree this Report.
(Sir John Kerr) I read this Report, but I did
not write it.
105. It does not matter who wrote it, with
respect, because, as accounting officer, if you agreed it, we
take it you are not going to argue with it and you are going to
be able to explain to us any anomalies which we see in it.
(Sir John Kerr) What I mentioned before was that
in relation to the British Virgin Islands, there is a difference.
Financial services in the British Virgin Islands and Bermuda are
regulated by, and they are the responsibility of the Minister
of Finance, not the Governor. In the other Dependent Territories,
they are the responsibility of the Governor, so if there is an
editorial mistake in this paper, I apologise for that, but it
is not my paper.
106. Well, that is helpful anyhow and it
has clarified a point, but let me now turn to figure 8 on page
33. You have referred to pressure which has been put on the British
Virgin Islands to cut back on the number of insurance companies,
but if we look at the Turks and Caicos, we find that they have
by far the largest number. They have virtually more insurance
companies, with 1,911 registered, than all the others in that
list put together and yet this is an area where the Governor has
responsibility for financial services.
(Sir John Kerr) That is correct.
107. Why did you make the British Virgin
Islands put their house in order and why has the Governor not
used his existing power to make the Turks and Caicos put their
house in order?
(Sir John Kerr) Mr Chairman, I do not want to
say now that there is anything wrong with insurance companies
that choose to base themselves in the Turks and Caicos Islands.
I agree with you, there is a surprising number of them.
108. Well, it is quite a few, is it not?
(Sir John Kerr) Yes, quite a few. We have, with
the assistance of the DTI, been looking at the responses from
all of the Caribbean Dependent Territories, including the Turks
and Caicos Islands, to a series of questionnaires on their insurance
industry and their regulatory practice. The DTI's view, I am told,
is that the quality of the legislation, that is legislation to
regulate the insurance industry, is broadly adequate, but the
quality of the regulation needs to be further improved.
109. Well, they are obviously carrying out
a great investigation before they give a licence because they
make people pay nearly £50 to get the licence, so clearly
they take the matter seriously, do they not?
(Sir John Kerr) I am sure that is correct, sir.
110. You are sure which is correct? Well,
both are correct because they charge just under £50.
(Sir John Kerr) I am sure they take it seriously
and--
111. You do?
(Sir John Kerr) Yes, I am quite sure.
112. Well, in that case, turn to the next
page and look at figure 9 and how do you explain that the Turks
and Caicos Islands have only two professional staff employed in
the supervisory work in relation to financial services? Two, and
that is just concentrated on the insurance companies. There are
not only the 11,000 business companies and the others that they
have, but they have nearly 2,000 insurance companies with two
people supervising them and they only charge just under £50
to get a licence to set up there and the Governor is in charge.
(Sir John Kerr) Yes, the Governor is in charge.
Mr Williams, I am advised that this is a rather particular and
specific kind of insurance, and this may astonish you--
113. No, nothing astonishes me in this Committee!
(Sir John Kerr) The companies in the TCI are largely
captive insurance companies going for one-off company risk insurance
and there is not a great deal of insurance for--
114. It is not for the individual consumer.
(Sir John Kerr) It is not the Pru. Therefore,
the risks are perhaps lower. Nevertheless, we do think there is
more to be done in this area, as I was saying in response to the
questionnaire issue.
115. Perhaps you could let me have again
a slightly fuller note on that. [4]Thank
you for the information you have already given, but, you see,
if we have an island like the Turks and Caicos, where the Governor
does control things and we find the situation I have described,
it is hardly surprising then that Mr Love has found the situation
at the bottom of page 33 where the Cayman Islands and the British
Virgin Islands told you to get lost, in rather non-diplomatic
language, did they not?
(Sir John Kerr) Well, they may have done in February
1996.
116. They failed to respond, I think is
the phrase.
(Sir John Kerr) I am advised that the legislation
they now have in draft is legislation that they will be implementing.
As I said--
117. No, no, that is not what you said.
(Sir John Kerr) I said to Mr Love--
118. No, no, no. I listened very carefully
to what you said to Mr Love. He pointed out that you withdrew
the original proposals because they said they were not having
anything to do with them and you then put forward weaker proposals
and you said you would welcome the support of this Committee because
despite the twelve-month time limit, they said "Get lost"
again in effect, but they still had not implemented them and you
were appealing to us to support you. Now you are telling us you
were wrong in that.
(Sir John Kerr) No, I am sorry, I do not withdraw
at all from my request for the support of the Committee. I agree
with you, sir, that this is an important area.
119. Why did you tell me that you were quite
happy with what they had in hand?
(Sir John Kerr) I must have expressed myself very
badly. What I was trying to say was that in the BVI they have
guidance in place and the legislation is not yet in place, but
the legislation is in draft. In the Caymans the legislation is
in draft. We would like to see that legislation pushed through
their legislatures quickly and put into practice. If this Committee
would recommend that, I would be extremely grateful.
Mr Williams: If you let us have a
full note on the issue, I am sure we will give it our detailed
consideration. [5]
3 Note by Witness: see Appendix 1, p. 23 (PAC99). Back
4 Note:
See Appendix 1, p. 23 (PAC99). Back
5 Note:
See Appendix 1, p. 23 (PAC99). Back
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