Hedge fund havens fight widening deficits with tax demand

Published:  26 Oct at 6 PM
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Tagged: Caribbean
Hedge fund havens from the Bahamas to the Cayman Islands are mooting a surprising cure for their ever-widening deficits – the initiation of higher taxes.

In the Cayman Islands, at present the home of the Caribbean’s highest number of hedge find companies, Prime Minister McKeeva Bush is planning an evowed increase in registration fees for new companies following expat workers’ anger ar a proposed tax on earnings. The Bahamas is setting up a debate to discuss an overhaul of the existing tax system which may include the introduction of sales tax and income tax.

Antigua and Barbuda is chasing the self-employed for tax evasion, with the country’s Finance Minister saying it’s high time to go for those who are cheating the system. According to Bloomberg, a large number of financial companies and hedge funds, including Bain Capital LLC, co-founded by Mitt Romney, have investments in the region to enable them and their clients to pay less tax.

However, widening debt burdens and deficits on a scale which rivals those of Greece are forcing Caribbean governments to step up and reconsider the strategies which initially lured investors to their shores. According to Carl Ross, MD of Atalanta-based Oppenheimer and Co, the hedge fund havens are in a catch 22 situation, explaining that, if they raise expat taxes, they decrease their countries’ appeal for investors.

Since 2004, five Caribbean Island nations including St Kitts and Nevis, Antigua and Barbuda and Jamaica have had to undergo debt restructuring and, last month, Grenada was unable to make its payment to investors of $193 million of bonds before the 30-day grace period expired. The IMF’s Therese Turner-Jones considers certain countries’ debt dynamics as extremely serious.
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