CAYMAN FUNDS | 2018 9
Windsor: Even on-island we need to consider the message. Cayman
Finance has been great in terms of educating the public on the benefits
that the finance industry brings to the community and job creation. We
need to stress how easy it is to do business in Cayman.
What will the recent tax reforms
in the US mean for Cayman?
Has CRS meant any changes?
Rivers: It is a space we’re watching closely, and we are getting
advice from our US tax counsel as the rules and the regulations are
developed. The reduction in the corporate tax rate to 21 percent may
lead to funds or other investment vehicles deciding that they need to
reconsider the most beneficial structure, but it may motivate certain
businesses to move to jurisdictions such as Cayman because they
are unable to obtain the foreign tax credits for foreign taxes paid.
Bahadur: For FATCA and CRS, there are now over 70,000 entities
registered in our system, with the majority of those being investment
entities. Looking forward to 2018 we are continuing to engage with
the OECD’s automatic exchange of information, as they conduct
assessments and monitor jurisdictions’ implementation of CRS.
Blackmore: It would be interesting to know how many other entities
there are, as we talked about the economic substance concerns. If
70,000 are captured and reporting under CRS, how many does that
leave for economic substance concerns?
Bahadur: In addition to the 70,000 for which we have data, we’ll have
a better idea of what’s happening in the multinational space once
country-by-country notification and reporting commences, and that will
help us in the discussions with the EU regarding economic substance.
Scott: Because we don’t have things like double taxation treaties
Cayman has never been a jurisdiction that’s been involved in trying to
shift tax bases.
Thomas: The tax changes are an interesting signpost because
carried interest tax has been on the agenda for probably in excess of
10 years now. As part of that bigger political picture there is pressure
on governments to close what the media perceives as loopholes.
But these arrangements have been put in place intentionally. The UK,
for example, has historically given private equity firms preferential
treatment of carried interest to encourage managers to establish in,
and carry on investment activities from, the UK. After all, investment
drives growth—tax doesn’t drive growth.
Pierce: Where we might see more of an effect is driving some of the
structures to Cayman for ECI (effectively connected income) reasons.
That’s one of the drivers onshore tax advisors seem to think is going
to be beneficial for us.
MacKay: If the US is about to embark upon a material infrastructure
investment strategy, that’s ready made for private equity to come in
on public/private partnership arrangements.
Scott: It possibly will also drive more interest in physical presence in
Cayman. I wouldn’t be surprised if we see more investments teams
starting to set up physical presence and operating from Cayman.
Calleja: One impact of US tax reform is on private equity. All valuations
have had a nice uplift so that is positive for encouraging investment
as you now have more attractive returns on investments and you’d
expect dividend yields to be higher. All this points to the increase in
private equity and investment.
Smith: Between September 2017 and early January the Authority
received 15 new applications for securities investment business,
which is unprecedented. We’re seeking to ascertain what’s driving this
growth and whether there is more to come. Should those applicants
be successful in obtaining a licence, this would be a 42 percent growth
in the number of licensees. So potentially this is reflective of the trend
of increased private equity investment.
“There’s a record amount
of dry powder sitting there
and waiting to be deployed.”
Simon Thomas