As I made clear to the BBC, even if UK tax is paid on the UK operations of this fund, no one sets up a Cayman Islands cooperation without wanting to take advantage of the lighter regulation, lower taxes, and greater opacity there. And no doubt they have done so. In that case, the messaging from Labour in accepting this is that they do not mind people undermining the rule of law in the UK by choosing to make use of other jurisdictions instead.
This is ignorance to the level of cretinism.
It’s a hedge fund. Therefore it has investors. That’s what hedge funds do. Take in money from investors and invest it. Then they pay out the profits of those investments to the investors. That’s the whole point of the thing itself.
Some hedge funds – possibly many or even all but certainly some – have investors from different places. Each of those different places has different rules about the taxation that is due on returns from investments. Some countries tax at the level of the company or fund and then dividends – say, just as an example – are tax free. Others pay dividends out before tax is paid then tax the dividends as income. The UK says dividends are paid out after corporation tax is paid and then you pay special, lower, dividend tax rates to account for that – those rates rising as your income does so as to give a progressive tax upon dividend income. The US has a system where if Federal corporate income tax has been paid then no further tax is payable by the investor – but only up to a certain amount per taxpayer per year. In Belgium dividends are tax free. And so on and on – investors resident in different countries face different tax systems and rates.
OK. So if you’re running a fund for investors from many different countries then what should you do? Well, set the fund up in a place that has a netural tax system. Then all of your investors can pay the right amount of tax, at the right time, in the right place, according to their country of residence. Using Cayman is an aid to tax compliance that is.
This isn’t tax dodging nor a lower rate of tax. It’s setting up so that all investors pay the right amount of tax and no more – tax compliance.
Something Professor Richard J Murphy doesn’t understand – despite his claim to have been a campaigner about international taxation for some decades now.
Don’t forget this is man who could start a fight in a phone booth , so this little missive with the ‘Tax justice Network’ from 2021 is definitely relevant here.
Although I am aware that much of my role in the creation of TJN, the formulation of most of its key policies with John, and in bringing them to the state of adoption that they now enjoy has been written out of TJN’s history on its own web site, as has the contribution of so many other senior advisers now also excluded and treated as “externals”, the reality is that for about a decade I worked almost tirelessly, and typically without pay, for TJN. That commitment – and that of so many who helped create TJN – is now side-lined, forgotten or just ignored.
I strongly suspect that is deliberate. You have sought to make TJN something that the founders never intended.
That TJN was a network is forgotten. It’s now a not very good econometrics outfit.
That it was set up to campaign is also ignored or downplayed.
TJN’s vision of social justice has been replaced by a desire to perpetuate employment for its staff by the production of ever more meaningless indices.
And instead of innovating policy solutions to influence debate TJN now ignores those who disagree with it and who it needs to influence, from the OECD onwards.
As for political economy, when once this underpinned TJN’s thinking, now any understanding of it appears to be absent.
Although that puts that issue alongside tax at TJN, where quite extraordinarily there now appears to be no one working at or advising TJN who has ever worked in tax, or accounting, or financial services. That was not true when we began. It’s as if TJN has forgotten what it was all about.
Actually, that is a perfect summary of the real problem. TJN was set up to campaign for tax justice. That’s a big, complex issue requiring innovation, adept communication and negotiating skills and some real, broadly based, comprehension of the technicalities, none of which TJN now has.
Instead it has the Financial Secrecy Index, and calls for solutions that can only delay progress towards any tax justice objective, but which will perpetuate index production for the indefinite future.
So let’s address those indices, because amongst the many things that you and your team have forgotten is that I was tasked with creating the Financial Secrecy Index, and did so in 2009, including providing its still completely recognisable structure and the theory that underpinned it. That included defining the term ‘secrecy jurisdiction’ which the index was intended to popularise as basis for campaigning for the reform of tax havens.
I would remind you, that the latter was the aim. The production of the index in perpetuity was not. To be honest, we thought we could usefully publish the FSI two or three times and then the message would be clear. It was. And much has been won as a result. Enough, in very many ways to say it is time for TJN to move on to other, new, bigger and more pressing tax justice issues. I have listed many of these of late, because in past, but not current, TJN tradition I never mention a problem without offering a solution.
It has been the failure to offer solutions, and your preference to hide behind data collation and analysis, that has led to the crisis currently convulsing TJN. Because you have eliminated all knowledge of tax and political economy within it there is nothing it can now say that is of use. TJN is now a hindrance to tax justice now, and can no longer play a useful leadership role. This sad situation has risen entirely on your watch and you must accept responsibility for this failure. Of course, I wish to dissociate myself from that failure, which is why I resign from any association now. I will come back when you and your management team are gone, if there is anything left of worth by then.
Yes he is ignorant – by design. don’t forget his piece on MMT earlier in the week adn ‘why it’s so vital’ Realistically the endgame of his philosophy is a taxation rate of 100%. Therefore any jurisdiction impacting that goal is a ‘secrecy jurisdiction’ and in his eyes evil.
His early report even had that well known ‘offshore tax haven’ of Norway mentioned. He is ignorant and evil – always a very dangerous combination.
Good explanation, thanks
Sounds like he might be skating close to a slander case, this time.
Where I worked we had a small team based in the Caymen isles. They all lived by the beach and enjoyed work. There was a long waiting list to transfer there. Their job was to take equity trade instructions from an office in one jurisdiction and transfer them to another. Rumor had it that a piece of wire between the systems meant that they were never busy. This was obviously a rumor as compliance would not permit this.
Err, are you sure about this?
Back in the day investment managers I worked for would often domicile funds in Dublin or Luxembourg – mainly because it was easier and cheaper than anywhere else (and gave instant access to the EU). Double taxation treaties generally iron out any tax issues. Also plenty of funds are domiciled in London.
My closest involvements with investments out of the tax havens (Cayman Islands et al) was with debt issuing entities i.e. corporate bonds, they seemed to be popular locations for companies to lend from. No idea if tax, secrecy or low costs were the driver.
As to why an investment fund would domicile in the Caymans it feels unlikely to me that given the existence of double taxation treaties, that tax neutrality for investors is a big consideration – I suppose attracting money from countries without treaties may be a factor.
V_P: excellent- and amusing.
Spud is banging on about ADHD and neurodivergence again.
He’s obviously decided that’s what he is.
And note how it’s superior to being ‘ordinary’.
A pension pot is a place where investments can grow, free of tax. When amounts are paid out, they are taxed when received.
A fund in a ‘Sensible Tax Regime’ (my new name for what used to be called tax havens) is a place where investments can grow, free of tax. When amounts are paid out, they are taxed when received.
There’s another asinine Venn Diagram for our times. FFS
Elsewhere, I see that another dead man, this time former Harrods boss Mohamed Al Fayed, has had historic rape allegations made against him.
It must be true as Al Fayed hasn’t denied it and the current owners of Harrods have apologised.
No doubt compensation is due.
BiS – presumably OGH is sure, -ish, or he wouldn’t have said it? OTOH, I’m pretty sure its correct, although I might be twenty years out of date. We did have a couple of clients who had a wee bit of an “oh, shit” moment when they discovered the domicile of various funds.
The cretin is very bitter that the new (oafish) Labour government has not called him in to advise them about finances. So he tries to impress them with his wisdom, but fails miserably with his basic and moronic mistakes – oh dear, no cabinet job for you!