Caribbean tax haven set to offer further incentives for wealthy investors and funds

News - Funds

Written by Ray Clancy

Tuesday, 05 January 2010 09:03

The government of the Cayman Islands has promised to sort out strict immigration rules that are putting off investment funds from basing themselves on the Caribbean paradise.

The British overseas territory, a group of beach-lined islands south of Cuba, is legal home to most of the world's hedge funds, but has seen a huge drop in the number of companies located there, industry experts say.
Some say it has been due to the global credit crunch but now it is emerging that inflexibility over immigration is also to blame.

Roger Hanson, former regional manager for Fortis Prime Fund Solutions, has admitted that it was immigration issues that played a significant part in the firm’s downsizing on the island. He said the company moved part of its operations to Curacao and downsized its staff after failing to obtain the immigration flexibility it needed. After Hurricane Ivan in September 2004 the company wanted to spread its risk and asked for two-to-three year permits for staff, he explained. ‘But we were not given them. So we said, fine. We can't continue to build back our infrastructure and not have any certainty after making all that investment,’ Hanson added.

In the last year or so Goldman Sachs, HSBC, Citi, Rothschild Trust, Fortis, Butterfield Fulcrum Group, Caledonian Fund Services, Maples & Calder have moved part or all of their operations to other jurisdictions such as Canada, Ireland, UK, US, Bermuda and Curacao.
While few have admitted openly to immigration limitations being the reason, in reality it appears to have played a significant part.

Now Caymans Prime Minister McKeeva Bush and other local policy makers want to prevent any exodus of companies in the strategic financial industry that accounts for more than half of the national economy, by offering more attractive, flexible immigration regulations in the islands.
But at the same time it is also proposing to increase the cost of permits of work permits by up to 200%.

‘As a jurisdiction, we cannot run the risk of making it too difficult to do business or increase costs. Once these companies have gone, they will never come back,’ said John Lewis of the local Fund Administrators Association.

The islands are looking to attract fund managers, brokers, and deal-makers that have a lot to say on where capital goes on creating funds, according to Sherri Bodden-Cowan, the head of the Immigration Review Team.

On the table are fast-tracked three to five year work permits and assurances that senior positions in investing companies will get immigration status that bypasses the seven-year time limit on foreigners working in the islands. There is also draft legislation giving wealthy individuals the right to live and work in the Caymans for 25 years if they make a business investment of $2.6 million.
There is a lot at stake. The financial services sector accounts for about 55% of the Cayman economy, according to an Oxford Economics report. It also brings in 40% of government revenue, income the country can ill afford to lose as it comes under increasing pressure from Britain to rely less on its tax haven image.