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A Beautiful Country That Hates Taxes

Grand Cayman from On HighSeptember 20, 2014 | by Steve McCurdy


Situated in the Caribbean, approximately 400 miles south of Miami and 300 miles west of Jamaica, are the beautiful Cayman Islands, which include Grand Cayman, Little Cayman, and Cayman Brac. Together, the three islands comprise a land area of 100 square miles, and they are inhabited by a permanent population of about 56,000. Peering through the window of your plane as you begin your descent into Grand Cayman (pictured above), there is little to suggest that you are looking at the fifth largest banking centre in the world. 

 

A Brief History
 

Recorded history didn’t begin here until the 1600s, when the English, under Oliver Cromwell, took Jamaica and the Caymans. The Treaty of Madrid gave the Caymans to Great Britain in 1670. It is thought that the islands were home to a rag tag band of settlers, including pirates, Spanish refugees, shipwrecked sailors and deserters until 1730 when the first British settlement was established. With that first settlement came slavery, and the island’s first official census in 1802 showed a total population of 933, with 545 being slaves. When slavery was abolished in the islands in 1833, 950 slaves were owned by 116 white English families.
 
The Caymans were governed by the British as a colony of Jamaica until 1962, when they became a separate Crown colony and Jamaica became an independent commonwealth. 

Government and Tax Structure
 

The Cayman Islands are a British territory and adhere to English Common Law. Among other things, this means that foreigners have exactly the same property rights and legal protections as do permanent residents, which is very uncommon in the Western Hemisphere. The Cayman Islands have a Constitution, and are managed by a Governor appointed by the Queen of England. The Governor has a Cabinet, and a 20-seat Legislature is elected by voters every four years. About 80 government departments carry on the Island’s day-to-day business. English is the Cayman’s language, and the Islands are overwhelmingly Christian.

 

Map of Grand Cayman 
Activity Map of Grand Cayman Island

There is a popular legend in the Caymans that dates back to an event known as the “Wreck of the Ten Sail.”  In 1794 Caymanians rescued ten merchant ships which had run aground off the coast. One of the ships, the HMS Convert, carried a member of King George III’s family, and legend has it that the King promised he would never introduce taxes on the Islands as a reward for the rescue.
 
Though the Legend is not true, the Caymans Government has never levied a direct tax on its The Cayman Islands Flagresidents. There is no income tax, no capital gains tax, no estate tax and no death tax on either individuals or businesses. In addition, The Cayman Islands is one of only 18 countries in the world which has no property tax
 
Will this no-tax tradition continue in the Caymans, or will governments chip away on individual freedoms as they always do until they kill the Golden Goose? Jeff Thomas is a Caymanian and is also a contributor to Doug Casey’s publication “International Man.” Jeff says that Caymanians have a long history of vehement opposition to direct taxation, and he believes this bias is so ingrained in virtually all Caymanian voters today that they will never willingly relinquish it.  

The Cayman Economy

 

Banking & Finance

 
There is an old saying that capital naturally flows to where it is treated best, and there is no better example of this than the Cayman Islands. The 100 square mile area comprising the Cayman Islands today is home to the world’s fifth largest financial centre. Consider the following:

• The Cayman Islands are populated by more registered businesses than people,
 
• Average, aggregate bank deposits in the Caymans total $1.5 trillion, which exceeds combined deposits in all the banks in New York City,
 
• More than 275 banks are licensed to do business in the Caymans,
 
• Forty of the world’s 50 largest banks have branches in the Caymans,
 
• Only one country in the world (Bermuda) has more captive insurance domiciles than the Caymans (which has over 700),
 
• More than 10,000 (80%) of all the world’s offshore hedge funds are registered in the Caymans, and
 
• The Caymans were ranked as the world’s second most significant tax haven in 2011 by The Tax Justice Network’s “Financial Secrecy Index,” behind only Switzerland.

In addition to its obvious tax advantages, the Caymans have a well-established infrastructure of financial service providers, global investment bankers, international law firms, and offices of the Big Four CPA firms. The Islands are also home to the prestigious Rothschild’s Wealth Management and Private Banking Group.
 
The Financial Services industry generates approximately 55% of the Cayman’s Gross Domestic Product each year and it accounts for 36% of total employment and 40% of government revenues.

Tourism

 
Tourism in the CaymansThe second major component of the Cayman economy is tourism. The Islands have a tropical marine climate with a warm, rainy summer season (May through October) and a cooler, dryer season from November through April. One of the country’s premier attractions is Seven Mile Beach, where most of the Island’s hotels and resorts as well as shops and public beach bars are located. “Caribbean Travel and Life” magazine named the Seven Mile one of the “world’s ultimate beaches.”
 
The Caymans are also a favorite destination for scuba divers. There are two major shipwrecks off of Cayman Brac, providing artificial reefs which have become dynamic environments for marine life, including particularly Goliath Groupers, stingrays, squirrelfish, and rare sponges. The Blue Iguana is indigenous to the Caymans, as are two subspecies of parrots, the Cayman Brac Parrot and the Grand Cayman Parrot. 

Overall Economic Data

 
The Caymans print their own currency, the Cayman Islands Dollar (KYD), which is pegged to the US Dollar at 1.227 USD to 1 KYD. With an average per capita income of $57,700, Caymanians have the highest standard of living in the Caribbean. According to the United Nations’ Main Aggregate Database, as of December, 2013, the Caymans had the world’s Cayman Sting Rayeighth highest per capita GDP, higher than that of Singapore, the United States, Germany, and Hong Kong, among others. Government revenues are generated primarily by indirect taxes such as import duties. 

Summary

 
The story of the Cayman Islands is a fascinating one for those of us who embrace small governments and free enterprise, as it once again shows what can be accomplished almost anywhere when the right kind of political system is in place. In less than fifty years a small tropical island with little industry and very few opportunities has grown into the world’s hedge fund capital and its fifth largest financial centre. According to Jeff Thomas, who lives there, this amazing growth was accomplished by a true partnership between well-educated, upwardly-mobile expatriates and homegrown Caymanians working together in a productive political and economic environment. Jeff says that all residents, regardless of their nationality, can succeed in the Cayman Islands if they make the necessary effort.
 
Like all countries, the Caymans regulate immigration and foreign investment and have established policies regarding expatriates. If you are considering a visit or you would simply like to learn more about opportunities in the Caymans I urge you to read Jeff Thomas’ writings on the Caymans here.

 

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