Cayman Finance has released a new report that outlines how Cayman’s tax and legal system attracts investment funds and companies to provide economic benefits to other countries.
“Cayman: Engine of Growth and Good Governance” argues that trade and investment are engines of innovation and growth. But this has to be underpinned by effective institutions, such as good governance in terms of political stability and the rule of law, a high-quality legal system that protects owners of assets, and effective and adaptive legislation and regulation.
The success of the Cayman Islands, the report states, relies on successfully combining all of these attributes with others that make it unique to international investors.
“This report documents how the Cayman Islands’ pure tax neutrality and commitment to good governance enable investors to pool capital securely and transparently and pursue investment opportunities that drive economic growth, create jobs and generate tax revenue in countries around the world,” said Jude Scott, the CEO of Cayman Finance.
“As this research shows, Cayman also poses no tax harm to other jurisdictions due to its tax neutral regime and early adoption of tax information exchange agreements, Common Reporting Standards (CRS), and other elements of the OECD’s Base Erosion and Profit Shifting (BEPS) project.”
While some jurisdictions offer some similar attributes, the report said, a key reason why both collective investment vehicles (CIVs) and multinational enterprises (MNEs) choose to domicile entities on island is that Cayman offers true tax neutrality at minimal cost in a well-regulated legal environment.
Other jurisdictions, the report claims, were at best only able to copy Cayman’s tax neutrality through the use of special structures and double taxation treaties. These, however, were highly limiting and came with additional costs.
The report, authored by economist Julian Morris, reviews research and published materials from the EU, OECD, IMF, FATF, UNCTAD, and other national and international bodies.
It maintains that Cayman and other tax neutral financial centres benefit developed jurisdictions like the EU, as well as less-developed countries, by facilitating the provision of trillions of dollars of funding to infrastructure and other projects, which in turn increase economic activity and innovation.
Cayman’s pure tax neutrality enabled entities to avoid double and triple taxation. And Cayman’s commitment to information sharing, means all activity is transparently reported to tax authorities in EU member states and other jurisdictions, the report said. This would lead to increased government revenue through a wide range of taxes.
“Tax neutrality is not tax avoidance,” Scott said. “A tax neutral jurisdiction does not add an extra layer of tax on top of what investors and companies owe in their own jurisdictions in compliance with their domestic tax rules.”
Scott added that the report demonstrated that, as part of the international financial system, Cayman is a transparent and globally responsible partner that improves access to capital in the US, UK, EU and other developed and developing countries.
“Moreover, it shows that international standards-setting and policy-making efforts should recognise and support the beneficial contributions to economic growth CIVs and MNEs domiciled in Cayman make globally,” he added.