[HN Gopher] Cayman Islands offshore finance: Anglo-America, Japa...
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Cayman Islands offshore finance: Anglo-America, Japan, and hedge
funds (2016)
Author : walterbell
Score : 55 points
Date : 2023-04-02 18:27 UTC (4 hours ago)
(HTM) web link (www.tandfonline.com)
(TXT) w3m dump (www.tandfonline.com)
| yieldcrv wrote:
| Caymans is just a better jurisdiction. A lot of their financial
| regulations make sense.
|
| It requires complete nationalistic hubris to dismiss that.
|
| Its not _just_ a tax blocker. That's just happenstance because
| some countries know how to balance their budget. I could think of
| two dozen other things that Caymans does better than large
| nations like the US or other financial haven microstates, for
| business incorporation, capital formation, audits and more.
|
| The regulators in Caymans are very meticulous, many are educated
| in the US at top universities or had careers in the US.
| markus_zhang wrote:
| I guess "making more sense" is purely subjective.
| xrd wrote:
| I'm reading the comments above and see the reminder to not be
| snarky. I'm not trying to be snarky with the following
| question.
|
| I can understand their financial regulations make more sense.
|
| But, they aren't contributing to the roads that US hedge fund
| operators drive on, right? Or, the airports out of which they
| fly?
|
| If I go further with your statement that their financial
| regulations make sense, should I interpret that as "US does
| taxation wrong" (or, it is incompetent with second order
| effects, etc)?
|
| But, even if the US taxation is wrong or not optimal, how do
| things like roads and airports get funded in the country in
| which the person resides?
|
| Is this completely wrongheaded? I don't understand how a
| citizen of one state can opt out of the taxation structure
| while still reaping the benefits of living there?
|
| Is this perspective incorrect?
| simple-thoughts wrote:
| Your perspective is correct but missing a critical fact. The
| hedge fund manager still pays taxes in his home country for
| his earnings abroad. So he still pays the taxes for those
| services.
|
| Where it gets more crazy is if the hedge fund manager is a US
| citizen but hasn't lived in the US for decades. The USG still
| requires he pays taxes, even though he isn't using any
| services. That's because taxes aren't a free agreement to
| purchase services but are rather an exercise of force.
| sokoloff wrote:
| The taxes in country A get paid when person Pa brings their
| earnings home as income. The taxes in country B get paid when
| Pb does the same.
| germinalphrase wrote:
| " I could think of two dozen other things that Caymans does
| better than large nations like the US or other financial haven
| microstates, for business incorporation, capital formation,
| audits and more."
|
| By all means - proceed...
| yieldcrv wrote:
| Not sure where to start
|
| Its mostly about the master feeder structure, other times
| about a sandwich, learn about those
|
| You have a feeder for domestic tax persons, and a feeder for
| non-domestic tax persons and domestic tax exempt persons
|
| Its usually dumb and pointless to have non-domestic tax
| persons to use your domestic feeder, because the regulations
| are poorly thought out and counterproductive and actually
| serve no purpose.
|
| all feeders are partnerships or limited by shares, and send
| capital to the master entity which does the trading
|
| the difficulty is that comparison is not _just_ about the US
| or any insulting any one country, many old world countries
| have withholding done on investment-in which even US people
| would find absurd. or the accredited investor requirements
| are much lower.
|
| The attentiveness and accessibility of the regulators is a
| boon.
|
| Dunno where to start but I hope that inspired on the depth of
| how deep to look. Its a great financial center.
| yt-sdb wrote:
| Can I make a suggestion? Most people in this thread will
| think you are wrong about the Cayman Islands. In this
| context, your comment, "Caymans is just a better
| jurisdiction," is provocative. You also claim you can think
| of 24 things that are better. Fine. But then this rambling
| comment with jargon and the all-too-common implication to
| "do your own research" is, from a rhetorical perspective,
| not persuasive. I'd be genuinely curious to hear a more
| detailed, layman-oriented answer.
| MichaelZuo wrote:
| Well having a law code that's readable and understandable
| within a single human lifetime would already be several
| hundred things done better.
| rr808 wrote:
| I heard too a lot of wealthy people have money in Caymans. Its
| not hidden from taxes, its just to prevent random people in the
| US suing for crazy amounts as they're prone to do.
| throwaway1777 wrote:
| Classic schemes like the cayman sandwich are getting broken by
| bank failures like svb. The cayman division was not fdic insured
| afaik.
| chollida1 wrote:
| > Classic schemes like the cayman sandwich are getting broken
| by bank failures like svb. The cayman division was not fdic
| insured afaik.
|
| This seems wrong to me based on my understanding but i'd be
| willing to be educated.
|
| Based on the fact that everyone got their money back from FDIC
| in what way have these bank failures caused "Cayman sandwich
| are getting broken by bank failures like svb"
|
| The Cayman's had one purpose for most hedge funds. Move assets
| off shore so all gains would be tax free. Once you want your
| money you onshore it again in and pay tax on that total. This
| allows your money to grow tax free, which means if you're good
| at it, it grows faster.
|
| It's just like a tax free retirement account that lets you
| deduct your contributes but makes you pay tax on the money you
| withdraw.
|
| As far as for companies using the cayman sandwich, what i've
| read says everyone got their assets out, no?
| kgwgk wrote:
| > Based on the fact that everyone got their money back from
| FDIC
|
| Did they?
|
| https://twitter.com/mdudas/status/1641959202078720001
| whitemary wrote:
| According to the shared documents, they will. They just
| need to file a claim first.
| kgwgk wrote:
| What documents?
|
| (Edit to add: If you meant the letter in that link what
| it says doesn't sound like "you will definitely get your
| money back, you just need to file a claim first" at all:
|
| "Balances held by customers in accounts at the Cayman
| Islands Branch at failure are not deposits under the
| Federal Deposit Insurance Act [...] Your status as a
| result of the Institution's failure is that of general
| unsecured creditor.")
| yorwba wrote:
| Second screenshot in the tweet you linked?
| kgwgk wrote:
| What do you think that "general unsecured creditor"
| means?
| whitemary wrote:
| It means "to be determined." To be clear, it does _not_
| mean their claim will be denied. And if very recent
| history, politics, presidential speeches are to be
| believed, it means their claim will be accepted.
|
| The first clue about contemporary political economy could
| tell us that the entire SVB meltdown would be socialized
| by the US state. See my comments in this thread for my
| predictions pre-bailout:
| https://news.ycombinator.com/item?id=35094447
| goatsi wrote:
| The key point isn't if a claim is accepted or denied (the
| people getting the letters almost certainly have standing
| to be accepted), it's if there is money to pay the
| claims, and how soon they can get it. Having an unsecured
| claim isn't "Show up on Monday and the FDIC will hand you
| a bag of cash", it's "The bankruptcy court and trustees
| expect the final settlement to be in 3-5 years, with a
| haircut of 10-30%".
| whitemary wrote:
| Source?
| kgwgk wrote:
| https://www.fdic.gov/consumers/banking/facts/priority.htm
| l
|
| "By law, after insured depositors are paid, uninsured
| depositors are paid next, followed by general creditors
| and then stockholders. In most cases, general creditors
| and stockholders realize little or no recovery. Payments
| of uninsured funds only, called dividends, depend on the
| net recovered proceeds from the liquidation of the bank's
| assets and the payment of bank liabilities according to
| federal statute. While fully insured deposits are paid
| promptly after the failure of the bank, the disbursements
| of uninsured funds may take place over several years
| based on the timing in the liquidation of the failed bank
| assets. "
| kgwgk wrote:
| Of course the claims won't be denied.
|
| The acceptance of the claims means that they will share
| the proceeds from the liquidation of the assets of the
| non-acquired remains of the bank with the other general
| unsecured creditors.
|
| As far as I can see, those Cayman Islands "not-deposits"
| will be paid just like the outstanding invoices owed to
| furniture distributors, etc. They'll get at least part of
| it but there is no guarantee about how much - and it will
| take time. [Of course they could (?) still decide to
| treat them differently. But the current outlook is not
| bright.]
| sokoloff wrote:
| And if the investments do grow, the governments still get
| their money, just later (but in greater sums at that time).
| lordnacho wrote:
| As a hedge fund guy, you stick your money on an island for tax
| reasons, but it's not always the nefarious reason everyone
| thinks.
|
| It's the tax neutrality that matters. Once an investor takes
| money back to their own country, they are responsible for the
| taxes themselves. Rather than a system where for instance you
| might pay the country of residence and every investor from around
| the world needs to fill in forms to get their difference back.
| tomatocracy wrote:
| Yes - I'm also in the asset management industry. The ultimate
| point is, investors in a fund don't want to end up in a worse
| tax position than if they'd made the investments in the fund
| directly and not via a fund. The worst of all worlds are paying
| tax at the fund level and not being able to offset that against
| local tax due - this is surprisingly more common than you might
| think; not to mention tax-exempt investors like some pension
| funds (sovereign wealth funds are a bit different again).
|
| Some jurisdictions for fund tax residence/incorporation are
| much much better for this than others. If you then also look at
| jurisdictions which have a predictable and fair legal system
| and an efficient admin setup for funds you end up with quite a
| short list of places (Cayman, Luxembourg, Ireland, etc).
| whitemary wrote:
| > _it 's not always the nefarious reason everyone thinks_
|
| We know for an actual fact that some people shoplift to feed
| hungry babies. Should we legalize shoplifting?
|
| https://www.msn.com/en-us/lifestyle/parenting/walmart-greete...
|
| I tend to think there's a better solution.
| ClumsyPilot wrote:
| Recently I saw that baby formula in our nearby store is now
| in the plastic box, with a tracker to make sure it's not
| stolen. Made me really sad. I asked the store employees, and
| apparently it's a common problem.
|
| We have already established, that 'just following orders' is
| not valid, and there does come a point where the law is so
| inhumane that you must disobey it.
|
| I don't think the line is at 'Hitler is in charge', I think
| it comes much earlier. For example 'The law' in Britain has
| castrated Allan Turing for being gay after he won a Nobel
| prise and helped win the war. Would you follow those orders?
| meindnoch wrote:
| >Allan Turing for being gay after he won a Nobel prise and
| helped win the war
|
| - Alan, not Allan
|
| - prize, not prise
|
| - Turing never received a Nobel Prize
| whitemary wrote:
| Right. Ironically, Great Britain, who financed the
| construction of the Nazi's military infrastructure, did in-
| fact draw the line at 'Hitler is in charge.'
|
| Under capitalism, the line is drawn by the owning class.
| Unfortunately, working people don't get a say.
| yt-sdb wrote:
| Isn't this analogy wrong? The question implied is: if
| shoplifting were legal and if some people shoplifted to feed
| hungry babies, should we make shoplifting illegal?
| whitemary wrote:
| If it weren't wrong, it would not be an analogy. Most
| intelligent people will realize that the current state of
| the law is irrelevant, but if you really can't get past
| that:
|
| If shoplifting were undesirable and if some people
| shoplifted to feed hungry babies, is shoplifting then
| desirable?
| yt-sdb wrote:
| From the guidelines [1]:
|
| > Be kind. Don't be snarky. Converse curiously; don't
| cross-examine. Edit out swipes.
|
| [1] https://news.ycombinator.com/newsguidelines.html
| [deleted]
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