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Comment by yieldcrv | Hacker News Reader

Caymans is just a better jurisdiction. A lot of their financial regulations make sense.

It requires complete nationalistic hubris to dismiss that.

Its not just a tax blocker. That’s just happenstance because some countries know how to balance their budget. I could think of two dozen other things that Caymans does better than large nations like the US or other financial haven microstates, for business incorporation, capital formation, audits and more.

The regulators in Caymans are very meticulous, many are educated in the US at top universities or had careers in the US.

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I'm reading the comments above and see the reminder to not be snarky. I'm not trying to be snarky with the following question.

I can understand their financial regulations make more sense.

But, they aren't contributing to the roads that US hedge fund operators drive on, right? Or, the airports out of which they fly?

If I go further with your statement that their financial regulations make sense, should I interpret that as "US does taxation wrong" (or, it is incompetent with second order effects, etc)?

But, even if the US taxation is wrong or not optimal, how do things like roads and airports get funded in the country in which the person resides?

Is this completely wrongheaded? I don't understand how a citizen of one state can opt out of the taxation structure while still reaping the benefits of living there?

Is this perspective incorrect?

Your perspective is correct but missing a critical fact. The hedge fund manager still pays taxes in his home country for his earnings abroad. So he still pays the taxes for those services.

Where it gets more crazy is if the hedge fund manager is a US citizen but hasn’t lived in the US for decades. The USG still requires he pays taxes, even though he isn’t using any services. That’s because taxes aren’t a free agreement to purchase services but are rather an exercise of force.

> The USG still requires he pays taxes, even though he isn’t using any services. That’s because taxes aren’t a free agreement to purchase services but are rather an exercise of force.

That and paying for the right to 86 it back to the USA when things get too hot elsewhere.

Think of it as an out of the money put option. It’s massively overpriced until it’s not.

Didn't work that well during Covid. US Passport didn't afford much. Temporarily became one of the least useful passports.

The taxes in country A get paid when person Pa brings their earnings home as income. The taxes in country B get paid when Pb does the same.

I would say this is wrongheaded. There are compliant ways to use offshore jurisdictions that result in not paying annual taxes, there are compliant ways to use domestic tax vehicles to not pay any tax as well. The IRS helps you in both circumstances. The framing by politicians and their constituents is just inaccurate.

The roads and airports that were going to get funded still get funded. No amount of taxation is going to fix the neglected area with poor people, its not going to happen. The taxes will continue to pay interest in debt that governments issue, excessive amounts of capital that… will never go to the neglected side of town ever.

Your civic duty is reporting tax events, paying what is legally owed. Nobody knows what “fair share” is.

And then… its not even about tax. Its about regulatory burden. Bureaucratic requirements to accomplish anything. Caymans has a fairly seamless and modern processes, intelligent and competent staff. Most jurisdictions do not. Its easy to think “there must be a reason for the bureaucratic requirements… in my country”, which country? USA? Netherlands? China? Surely one is less true than the other, the point here is to spark introspection.

Cayman services all, it doesn't have the geopolitical baggage while adhering to broad sanctions lists.

I heard too a lot of wealthy people have money in Caymans. Its not hidden from taxes, its just to prevent random people in the US suing for crazy amounts as they're prone to do.

I guess "making more sense" is purely subjective.

“ I could think of two dozen other things that Caymans does better than large nations like the US or other financial haven microstates, for business incorporation, capital formation, audits and more.”

By all means - proceed…

Not sure where to start

Its mostly about the master feeder structure, other times about a sandwich, learn about those

You have a feeder for domestic tax persons, and a feeder for non-domestic tax persons and domestic tax exempt persons

Its usually dumb and pointless to have non-domestic tax persons to use your domestic feeder, because the regulations are poorly thought out and counterproductive and actually serve no purpose.

all feeders are partnerships or limited by shares, and send capital to the master entity which does the trading

the difficulty is that comparison is not just about the US or insulting any one country, many old world countries have withholding done on investment-in which even US people would find absurd. or the accredited investor requirements are much lower.

The attentiveness and accessibility of the regulators is a boon.

Dunno where to start but I hope that inspired on the depth of how deep to look. Its a great financial center.

Can I make a suggestion? Most people in this thread will think you are wrong about the Cayman Islands. In this context, your comment, "Caymans is just a better jurisdiction," is provocative. You also claim you can think of 24 things that are better. Fine. But then this rambling comment with jargon and the all-too-common implication to "do your own research" is, from a rhetorical perspective, not persuasive. I'd be genuinely curious to hear a more detailed, layman-oriented answer.

I can see that

It practically requires people to play devil’s advocate to anything I observe about the cayman islands

But the article also contributed to that, it acts like its a big mystery when the reality is that academic research groups could just never get enough money to dry run forming a hedge fund in the cayman islands and say “oooh I get it”

now they finally did some research and realize this is the worst kept secret, everyone is using the Cayman Islands already for a multitude of reasons that have nothing to do with hiding anything from tax revenues

You said it’s not just a tax blocker. Yet your explanation only explains how it is a tax blocker.

> or the accredited investor requirements are much lower. The attentiveness and accessibility of the regulators is a boon.

Not really, but it's hard to tell through the jargon.

The point is that the Caymans are neutral territory for tax purposes. If you're in the US, you owe US taxes on the profits in your Cayman fund. Likewise, if you're in Canada, you owe Canadian taxes on the profits on your Cayman funds. This is better than setting your investment vehicle up in Delaware, because if you do that, your Canadian investor will have to pay US taxes (that they don't owe) and then spend months trying to get the money back.

The on-shore US regulations are crazy enough that US based institutional investors (like pension funds) will get nervous at the lack of professionalism if you aren't using a Cayman vehicle.

Well having a law code that’s readable and understandable within a single human lifetime would already be several hundred things done better.

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