Archive for the ‘Tax Issues’ Category

Cayman Finance letter to Huffington Post

Wednesday, June 23rd, 2010

Dear Ms. Huffington:

Your recent post citing the Cayman Islands in a list of “tax havens” is unfair and inaccurate.  The Cayman Islands — far from being a “tax haven” — are on the elite OECD global “white list” of jurisdictions that meet the highest standards for financial transparency.

FICTION: The Cayman Islands are a “tax haven.”

FACT: The Cayman Islands has full tax transparency with The United States and with 27 members of the European Union.  The US Department of Justice has had full authority to make enquiry in relation to any file in the Cayman Islands since 1990. The anti-money laundering legislation of the Cayman Islands has been evaluated by the International Monetary Fund and by the Financial Action Task Force and is found to be superior to that Of the United States and most EU jurisdictions.

FICTION: Offshore accounts such as those in the Caymans are used by multinational corporations to avoid paying any taxes or to commit tax fraud.

FACT: American corporations already pay taxes in the jurisdictions where they operate.  Additionally, all profits of subsidiaries of US parents — regardless of where they are incorporated — are consolidated and accounted for and taxable in the U.S. as profits of the parent, except to the extent that legitimate tax deferral applies under current IRS code.
Offshore financial centers, like Cayman, enable American companies to compete internationally and reinvest their profits; treaties with the U.S.
ensure they do not evade taxes.

FICTION: U.S. policies regarding “tax havens” and tax deferral for US multinationals are linked.

FACT: The issues of offshore financial centers and tax deferral for US multinational corporations are separate.  The future of tax deferral laws in the United States is an internal U.S. tax matter.

FICTION: Corporations cheat the public out of tens of billions of dollars a year by using offshore tax havens.

FACT: The financial services sector in the Cayman Islands is enormously important to the economic growth of the United States. Cayman financial services institutions pool funds from the international capital markets and direct those funds into investment opportunities in G20 jurisdictions. The impact of those investments in growing the American economy cannot be overstated.

FICTION: Money flows from the U.S. to the Cayman Islands, where it is hidden.

FACT: The favored location for Cayman funds to invest is the United States; the preponderant flow of capital is from the Cayman Islands into, not out of, the U.S.

Let’s keep the facts straight and avoid name-calling. Most of what Americans think they know about the Cayman Islands is wrong.  It¹s time to learn how our financial services industry is working to promote economic growth in the United States and around the world at http://www.caymanfinances.com.

Cayman Finance

Posted in Fiction vs. Fact, Tax Issues, USA | 1 Comment »

Cayman’s Incentive Package and You

Thursday, February 11th, 2010

Dramatic new incentives from the Cayman Islands Government (CIG) have now  revolutionised the immigration landscape for financial services firms and individuals intending to move their business to Cayman or invest in new businesses here.

What is it that Cayman is really offering?

The most significant attraction for business and investors is this:  In a world where government intervention is increasingly affecting every area of business activity Cayman remains the last bastion of pure capitalism.  A perfectly formed example of small, non-intrusive government in a high tax world.

The Tax Foundation organization in the United States calculates that Tax Freedom Day (the day when citizens actually get to keep their income having paid their annual dues to the government) will fall on April 13 for 2010.  This means the average American has to work about three and one-half months of the year for their government.  That is over a quarter of the year.

Tax Freedom Day in the UK fell on 14 May 2009 as reported by AdamSmith.org, meaning that for the first 134 days of the year every dollar earned by UK residents was handed over to their government.

In Canada, according to the Fraser Institute, Tax Freedom Day occurred on June 6 of 2009.   Nearly half a year’s income, 43% of an average family’s annual income, is taken by the various levels of government (municipal, provincial, and federal).

In the Cayman Islands our no direct tax system means that individuals and corporations keep 100 cents in every dollar of remuneration and bonus.  There are no direct taxes of any kind.  No income tax, no property tax, no capital gains tax, and no sales tax.  Government supports itself through indirect taxes such as import duties, licencing fees, airport fees, and work permit fees.  Not only does this encourage businesses and individuals to grow their income, knowing they can keep it , but it also provides incentive to the CIG to keep its costs in order and not expand government spending needlessly.

Additionally the Cayman Islands is a very stable jurisdiction.  Its non-intrusive government does not attempt to micro-manage the lives of its residents.  It offers a great lifestyle for visitors and residents, with first class schools, restaurants, shopping, and activities.  And the business infrastructure for financial services is second to none.

Since it established its financial services platform more than four decades ago, the Cayman Islands has grown into a leading global financial services centre supported by a sound legal and regulatory framework, world-class infrastructure, and high quality service providers.

The Cayman Islands is one of the world’s leading providers of institutionally focused, specialised financial services and a preferred destination for the structuring and domiciling of sophisticated financial services products.  It plays an important role in global markets by facilitating the flow of capital and lowering the cost of doing business.

You would be hard pressed to find another jurisdiction that can offer all of these advantages to protect your wealth, grow your business, and raise your family.

The American dream.  Now residing in Cayman.

For more information on the new government incentives to live, work, and invest in the Cayman Islands please visit: www.caymanfinance.gov.ky

Posted in Corporate, Incorporation, Individual, Tax Issues | 1 Comment »

OECD giving up moral high ground

Thursday, January 28th, 2010

The latest statement from the OECD regarding its ongoing global tax collection quest establishes a new gold standard in irony.

In a Reuters online article by Tamara Vidaillet, which can be viewed here, Geoffrey Owens , head of the OECD tax division (is there another division?), says that he fully supports the use of illegally obtained, or stolen, client information from financial firms in order to track down tax cheats.

“What we don’t condone is taxpayers who do not comply with their obligations,” said Owens, seemingly oblivious to the well established principle of international law that renders a tax liability in one jurisdiction unenforceable in another, and the illegality involved in violation of an individuals’ right to privacy.

So we have established the new world order, which appears to state that the promotion of and the outright violation of criminal law in countries where private data is protected is appropriate if it meets with the objectives of an international body.  This would be worthy of greater study if it were the case that this new principle conforms with the objectives of the OECD as set out in its constitution.  But it does not; the objectives of the OECD, publicly promoting the economic well being of member and non member organizations, are strangely silent on the subject of renegade lawlessness.

So, as we understand it, the OECD message is now that it is acceptable for their members to violate local and international law if it benefits them fiscally?  That is at least showing the OECD to apply the same moral and legal standard as the shadowy ‘tax evaders’ are accused of.

What this latest statement reveals, with absolute clarity, is that OECD and its executive has abandoned any pretence of inhabiting the moral high ground and is now acting out of greed, desperation, and institutional arrogance.  The OECD now feels able to flaunt its disregard of the rule of law and the rights of sovereign nations in a self-described pursuit of international tax  ‘justice’.

Whilst none of this is of direct relevance to the Cayman Islands, which has an extensive network of proactive and reactive tax reporting treaties with the US and the EU jurisdictions, as we have discussed in previous blogs, there is a greater concern here.  The recently expressed objectives of the OECD do not extend simply to tax evasion.  The OECD believes that any form of tax competition is harmful and, we conclude, feels now that its disregard for law and principle may extend to the pursuit of any of its objectives.

Theft of your private data is being justified today.  Will theft of your family’s savings be next?  That sort of conspiracy theory should remain the stuff of Hollywood films, but sadly the OECD’s statements are suggesting we are already on that path.

Now more than ever proactive businesses and individuals need to consider whether a move to a fairer, more progressive jurisdiction might be the best way for them to create or protect their wealth.

Posted in OECD, Tax Issues | No Comments »

The Need for Tax Competition

Tuesday, December 15th, 2009

For many months now Cayman Finance has spoken about the law of unintended consequences as it relates to overseas legislation on tax issues.  Today, a news report by the Times Online “City broker will relocate staff to avoid supertax” clearly validates both that warning from Cayman Finance and the need for tax competition globally.

As governments around the world feel more pressure to raise revenues in an increasingly lopsided battle with their national debt and future obligations it is vital that there be some kind of counterbalance to protect people from sudden and violent swings in tax rates.

The article, by Robert Lindsay, focuses on a single Broker firm, Tullett Prebon,  which provides special brokering services for investment banks and employs 700 brokers and staff in London.  But the facts apply broadly.  A new UK ‘supertax’ that will take 50% of bonuses over £25,000 awarded to banking sector employees is being implemented and is set to run until ‘at least’ next April.  Quite naturally few people believe the new tax would not be renewed in subsequent years.

As a result many of Tullett’s broking staff  have reportedly expressed an interest in moving away from the UK.  And competing firms overseas are using the occasion to aggressively recruit brokers away from London firms.

This could just be the thin end of the wedge as tax ‘grab’ policies encourage the highest income earners, those in the highest tax bracket that pay the most in both income and consumption taxes, to leave their home jurisdictions in search of places with equal standards of living where they can keep a larger percent of earned income.  The end result is higher tax policies leading to lower government revenues.

And this is exactly why tax competition between jurisdictions is necessary.  Without it, nations become empowered to target sectors, businesses, or even individuals with punitive taxation measures and there would be less incentive for the economy to grow earnings.  We believe that you have to risk capital to earn profits and the potential return has to justify the decision to put your capital in harms way.  Unrestrained taxation skews this natural process and actually constrains growth.

The difficulties facing the UK and US raises the question of whether the recent G20 focus on Offshore Financial Centres with low tax rates was really focused on the stability of the global financial system, or has the true goal been the elimination, or at least minimization, of tax competition globally?  Given that the root causes of the financial crisis were decisions made in G20 nations regarding bank lending and the failure to regulate we believe the answer is clear.

Posted in Banking, Corporate, Individual, Tax Issues | 1 Comment »

Positive Movement on US Legislation

Tuesday, October 27th, 2009

Three prominent members of the US House and Senate issued a joint press release outlining their proposed legislation to prevent US residents from unlawfully evading taxes.  The legislation includes comprehensive proposals to clamp down on tax evasion and improve taxpayer compliance by giving the IRS new administrative tools to detect, deter and discourage offshore tax abuses.

This entirely reflects the confirmations that Cayman Finance have received from key staffers in Washington in that the “list “based approach, favored by Senator Levin’s proposed legislation, appears to have been rejected in favour of a transparency based approach.  Whilst the legislative process has not yet got underway we are pleased that these proposals are entirely consistent with the approach suggested by Cayman Finance.

New regulations would force foreign financial institutions, foreign trusts, and foreign corporations to provide information about their U.S. accountholders, grantors, and owners, respectively.  Chairman of the Ways and Means Select Revenue Subcommittee, Mr. Richard Neal said ““This bill is a continuation of my efforts to reduce tax evasion by American citizens and bring more transparency to international banking.”

This is obviously very positive news for the Cayman Islands, which has been a fully transparent jurisdiction for the last decade and a leader in regulatory and compliance issues related to global finance.  We can only hope this will finally put to rest any and all efforts by G20 nations to portray Cayman as a ‘tax haven’ and that we will not be forced to repeatedly jump through the same old hoops to prove what must now be evident to anyone with knowledge of global financial markets – namely that the Cayman Islands is the last place on earth that individuals would choose for the purpose of evading taxes.

Posted in Tax Issues, USA | 6 Comments »

Tightening the noose

Friday, October 23rd, 2009

Last month French bank BNP Paribas announced to the world that it will stop operating in countries that are on the ‘gray list’ published by the OECD.  This decision, the first of its kind by any major bank, puts Panama and the Bahamas directly at risk of losing business and increases pressure on all gray-listed countries to conform to the OECD mandate.

While this type of gamesmanship will not affect the Cayman Islands today, due to our OECD White List status, it does raise concerns for smaller nations such as ours that the playing field will continue to be modified by G20 nations until they achieve their ultimate goal: the “one size fits all “global tax rate .The G20 nations intend to use every opportunity to raise taxes from any source in order to deal with increasing national debts.

With all of the recent focus on Cayman’s debt, which stands at a realistic 25% of GDP, it may surprise some people to discover that UK debt, according to their own statistics office, at the end of March 2009 was equivalent to 55.5% of GDP and unofficially, if unfunded public sector pension liability is included, may amount to three times that figure. Similarly France’s public debt rose to 73.9% of GDP in the second quarter of 2009, and estimates for the US put their figure at close to 90% of GDP for 2009 and is expected to top 100% in the near future.  Little wonder then why these large economies are seeking to exercise their combined might to force smaller nations like Panama, the Bahamas, Barbados, and even the Cayman Islands to change their policies on taxation.

The belief shared by the G20 nations is that low tax regimes are ‘unfair’ and rob their governments of desperately needed tax revenue.  What this theory fails to consider is what drives the economic growth of these large economies.  The answer is not tax dollars, but investment dollars.  And without tax neutral jurisdictions, like Cayman, it would be more difficult, not less difficult, for onshore jurisdictions to attract international pools of investment capital that find their way into these economies.

So the question is:  Will the G20 nations recognize the negative impact to their economies by excluding their own financial markets from accessing offshore financial centres? By attempting to put the squeeze on offshore centres they may unwittingly be tightening the noose around the neck of their own economies.

Posted in Agreements and Treaties, Corporate, Fiction vs. Fact, G20, OECD, Tax Issues, USA | 2 Comments »