The Cayman Islands, a tiny British overseas territory located 450 miles due south of Miami, boasts the world’s largest turtle farm, along with some of the best scuba diving on the planet.
But what really puts this colony on the map is its world-class status as an international tax haven. In short, this means the Cayman government imposes on its 78,000 residents no corporate tax, no income tax, no payroll tax, no capital gains tax and no withholding tax.
Rather, the local government generates tax revenue through customs duties levied on all products imported into the three-island territory, which in addition to Grand Cayman also includes the much smaller and sparsely inhabited islands of Cayman Brac (population: 2,000) and Little Cayman (population: 160).
All told, roughly 85% of the world’s hedge funds are believed to be domiciled in the Caymans—a fact that has helped give the Caymans a per-capita income exceeding $86,000 a year, the highest in the Caribbean.
Chris Duggan would like to keep things that way.
Duggan, 45, is the new Cayman Islands’ official Washington-based representative to North America, overseeing his territory’s relationship with both the United States and Canada.
On Jan. 26, Duggan formally opened his new mission on the 12th floor of the National Press Building. About 60 people, including the ambassadors of Jamaica and St. Lucia, celebrated the milestone at DC’s City Tavern Club in Georgetown—which happens to be remarkably similar to the name of the territory’s capital city, George Town.
“Broadly speaking, this new Washington office is a logical extension of the Cayman Islands’ commitment to openness and transparency,” Duggan told us by phone last week. “We want to make people more aware that the Caymans as a jurisdiction is fully committed to meeting standards of financial transparency and the international fight against financial crime.”
In fact, he added, “some people say the Caymans has a really good story to tell, it just hasn’t been told. We certainly have nothing to hide, so what better way of being up front than opening this office in Washington, where I can communicate a very clear, concise constant message.”
Duggan was born and raised in the Caymans. After earning a bachelor’s degree in business administration from the University of Cardiff in Wales, he returned to his Caribbean birthplace and has been working in the private sector since then—primarily in the banking industry.
For several years, he was head of private banking for Bermuda-based Butterfield Bank, then moved to international business development for a large family-owned conglomerate.
Duggan said the Cayman Islands has become the jurisdiction of choice for the funds industry—and the broader financial services industry—“because we have a lot to offer” as a jurisdiction. Among its advantages, he said:
- A very stable and efficient parliamentary system of government and operate under English common law, with ultimate appellate recourse to the UK Privy Council.
- Excellent infrastructure, with deep expertise in financial services, including the Big Four accountancy firms and some of the world’s top offshore law firms domiciled in Cayman
- Proximity to, and similar time zone as, the US East Coast
Yet the Cayman Islands has a reputation as a haven for money laundering. For example, each year, the nonprofit Tax Justice Network publishes a Corporate Tax Haven Index ranking the jurisdictions most complicit in helping multinational firms underpay corporate income tax.
The Cayman Islands ranks second on the 2021 index, behind only the British Virgin Islands and ahead of Bermuda, the Netherlands, Switzerland, Luxembourg, Hong Kong, Jersey, Singapore and the United Arab Emirates. The UK-based organization says the Cayman Islands is currently responsible for 6% of the world’s corporate tax abuse risks.
Duggan, of course, disputes such rankings, contending that “this is an unfounded reputation, so my role is to get the proper story out there and dispel any myths.”
In February 2021, the Financial Action Task Force (FATF) added the Caymans to its so-called “gray list” of countries and territories that could be doing a better job fighting money laundering.
According to a Jan. 16 report by the Cayman News Service, the territory “has consistently faced concerns because of its failure to prosecute any offshore financial crimes. Most of the money laundering cases here have been related to theft and deception cases, largely carried out by individuals in offshore firms, rather than cracking any international cases.”
The report added that a gold smuggling trial which began in 2019 “was one of the first major trials of its kind here, but it ended with most parties being acquitted.
Nevertheless, the Cayman Islands government hopes to issue a formal statement sometime this month announcing that the territory will be removed from that list at the FATF monitoring body’s next session in June.
“Right now, we are on the FATF list, which means we are automatically on the EU list as well,” Duggan said. “We fully anticipate that within the next few months, we’ll be removed, which will automatically have us removed from all the other lists. We’re about to cross that final hurdle.”
In addition, he said, since the introduction of global sanctions against Russia nearly a year ago, following its attack on Ukraine, the Caymans has frozen nearly $9 billion in Russian assets.
“Our country is a fully committed and reliable partner to increase tax compliance, financial transparency and, more recently, sanctions enforcement,” he said. “The laws of the Caymans require transparency. We believe steadfastly that anyone living or operating in our country should pay taxes where taxes are due. We’re not in the business of assisting individuals to evade paying their taxes.”
In addition to financial services, Duggan will also promote his territory as a tourism destination to Americans and Canadians. Beginning last November, Cayman Airways began offering nonstop flights from Los Angeles to Grand Cayman. Nonstop service is already available from Miami, New York and Tampa, with seasonal service from Denver as well.
During the first six months of 2022, according to official statistics, the Caymans received 212,997 cruise-ship visitors and 114,201 stayover air arrivals, with tourists staying an average 6.2 nights. Carnival Corp. accounted for 54% of cruise arrivals, Royal Caribbean another 27%, and Disney Curise Line and MSC Cruises the remaining 19%. At present, Grand Cayman has 6,688 hotel beds, followed by Cayman Brac with 266, and Little Cayman with 162.
“While it’s not an everyday role for me, I will, where required, work on tourism,” Duggan said, noting that before the pandemic, over 500,000 people visited the Caymans annually. Since then, he said, “we’ve covered from COVID—and this will be one of our strongest seasons in history.”
Very informative story on the Cayman Islands. Thanks, Larry. Keep up the good work
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