CAYMAN FUNDS | 2018 7
We are very keen on helping the EU and the OECD to understand
our industry and the different sectors. The OECD has acknowledged
that the fund space could be considered differently for economic
Simon Thomas: My understanding is that the EU and OECD initiatives
were targeting big multinationals that are essentially jurisdictionshopping
to get the best tax deals. In the fund context, where portfolio
companies and investors are paying the appropriate level of taxes due
in their home jurisdiction, no-one is saying that the funds themselves
should pay more tax.
The fund industry is absolutely right, participants should be engaging
with this and explain why they are different.
Mark Cook: I’ve had a few instances where European managers have
essentially redomiciled funds because they were getting pressure
from investors, but I find it very encouraging that there is recognition
by the EU and OECD that the fund space is different. Managers are
regulated and investors are taxed in the jurisdictions they’re in. A
Cayman Islands fund vehicle is a sensible vehicle to enable parties
from different jurisdictions to come together.
The Cayman Islands professional community does a great job of
providing support and infrastructure to facilitate that. For me the
concerns of the OECD have been misplaced.
Scott: As a jurisdiction what our clients are really looking for is for us to
be proactive in the process. We need to visibly show we are engaging
on regulatory matters. We also need to appreciate that politics come
into play as well. If you take Brexit, there may be definitions that work
for the EU that may be disadvantageous to the UK.
We must look beyond short-term decisions and take a proactive
approach that finds a solution that works for all financial centres in and
out of the EU and globally.
MacKay: There are strong politics at play in whatever moves the EU
is trying to make. They represent a populace but a relatively small
part of the world. For us as a global industry, the OECD is probably
the most important player in this debate. We need a standardised
approach but the application needs to be proportionate to the industry.
The funds products are different, they are not operating companies,
they are capital vehicles. That presents a very different model for
economic substance than does an operating vehicle.
The other factor to bear in mind is that there is a lot of economic
substance in Cayman. We have regulatory requirements, the audit
process is led from Cayman and a significant proportion of funds have
independent directors based here in Cayman.
Going forward, will we see administration done more on-island?
Potentially. That will perhaps come out of what economic substance
means, but that could be good for the jurisdiction from a local economy
perspective; everyone around this table would welcome that.
That has to be balanced with investor preference and the economics
of the fund itself. You can’t increase the cost base. Investors will vote
with their feet. And it comes back to the underlying political element,
which is, unfortunately, the reality of the world we live in. The fact is
that those who debate the Cayman Islands and international taxation
and regulation do not always have an informed position.
The OECD has recognised the level of cooperation from a tax
perspective that Cayman has had for 20 years, but that doesn’t play in
the public domain. Whatever the discussion is and goes for economic
substance, it needs to be debated by informed participants and the
OECD has a material role to play in it.
Rivers: Those who know us, know what we do. They know the
structures; they know the benefits to the global economy that
we provide, as well as to domestic economies. But perhaps we
do need to do more to engage or influence the public perception,
because of the political pressure placed on the policymakers in
We need to help the average person on the street understand what
we do and how we benefit the global economy. The political pressure
are struggling to
figure out how they
can still be efficient
the needs of