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I recently came across a website that was touting the benefits of working in cayman islands. Work for a financial firm, earn well, scuba dive...and..............pay NO taxes.

Now, if the people are not paying taxes, what is the source of government earnings? My other question is....what is the catch here? It seems a North American skilled worker can immigrate and start collecting savings at a great rate because he is not paying tax.

Not to mention living on the beach.

What exactly is the catch in this paradise lifestyle? EDIT: Source: http://squiresresources.com/candidateservices/articles/10-11-12/Canadian_Taxes.aspx EDIT#2: Also, when you bring the money back to Canada after a few years, do you pay tax on that?

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It's not that the Caymans have the highest standard of living... Note that overall happiness of citizens is highest in Skandinavian countries, which have really high income taxes. Taxes are never just high or low, they are only high or low in comparison to what the state does with them. Low taxes and wasteful government can make things worse than high taxes in an efficient government. – Lagerbaer Aug 7 '11 at 16:31
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I was reading this: arstechnica.com/tech-policy/news/2012/03/… This isn't about the Cayman's specifically, but it suggests that corruption and graft is the way those islands raise funds outside of taxes. – MrChrister♦ Apr 3 '12 at 5:15
gov't sources of rev: fees from the offshore financial sector. – Joe Coder Guy May 13 at 19:42

4 Answers

up vote 26 down vote

If you're an American, and willing to give up citizenship, good luck to you.

Otherwise, Uncle Sam still wants his due -- Americans are responsible for paying taxes on income earned anywhere on earth, regardless of their residence.

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The questions was tagged as 'Canada' :) If you declare yourself as a non-resident of Canada, you do not pay tax on foreign income, provided you can prove you are no longer maintaining a presence in Canada. When you return, you do not owe taxes on money earned abroad either. – Jedidja Apr 4 '12 at 17:55
up vote 18 down vote

According to Wikipedia, import duties on goods range from 5-22% on everything but cars (30-100%) and a handful of other goods (no import duties). Since almost everything must be imported, you will still be paying the taxman, just on the consumption side.

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Sorry...but can you please explain relation between import duty and tax? – Kaushik Aug 7 '11 at 18:56
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@Kaushik: Let's say you spend 30k a year on food, consumer products, consumables of any kind, etc., and the average import duty on those goods was 20%. That means you paid 120% of the cost that the importer set on those goods; the actual cost was really 25k total, and you paid an additional 5k to the government. For a place like the Caymans that has essentially zero local production, import duties act a lot like sales taxes, VATs, or any other consumption-based tax, with all the implications. – jprete Aug 7 '11 at 19:15
@ Thank you sir – Kaushik Aug 7 '11 at 19:20
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So "servants/slaves" are tax free, but goods have a high tax on them. – Ian Aug 8 '11 at 16:22
up vote 1 down vote

From http://www.taxrates.cc/html/cayman-islands-tax-rates.html:

There is no income tax, corporate tax, sales tax, capital gains tax, wealth tax, inheritance tax, property tax, gift tax or any other kind of direct taxation in Cayman Islands.

Cayman Islands government receives the majority of its income from indirect taxation. There is no income tax or capital gains tax or corporation tax in Cayman Islands imposed on Cayman individuals and Cayman Islands companies. An import duty of 5% to 20% is levied against goods imported into the islands. Some items are tax exempt like baby formula, books and cameras. Tax on automobiles depends on the class and make of the model. Tax can reach up to 40% for expensive car models. Financial institutions that operate in the islands are charged a flat licensing fee by the government. A 10% government tax is placed on all tourist accommodations in addition to the small fee each tourist pays upon getting on the Caymans. The Cayman Islands government charges licensing fees to financial institutions that operate in the islands as well as work permit fees for expatriate employees ranging from around US$ 500 for a clerk to around US$ 20,000 for a CEO.

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up vote 0 down vote

The Cayman Islands has an income tax enacted, it is just currently 0%. It raises revenues from its tourism, import duties, and business registration.

It is part of the UK commonwealth and therefore enjoys the military protection of that federation, but doesn't have to spend on it. But unlike the US, the UK does not have an umbrella federal income tax on its overseas territories, so the Cayman Islands doesn't have to pass that down to its citizens nor do its citizens/residents have to be encumbered by one.

It was not taxed by the King when it was first incorporated (hm, might need to fact check that). They also didn't go to war with the king over some small tax, so they got treated differently than some other North American colonies you might think of.

The Cayman Islands is not the only government that raises revenues this way. Delaware also has a 0% income tax and raises the majority of its revenues on business registration (and perpetual franchise taxes on those businesses), allowing it to spare its citizens from passive income taxes. But unlike a US state, a citizen or business in a UK overseas territory does not have federal regulatory overhead, making it more attractive as a worldwide financial center.

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-1 for the last paragraph (although the whole "answer" doesn't really answer anything). Totally irrelevant, and is a complete nonsense. Governments are not businesses, and one shouldn't consider a "business model" wrt to the govenrment. Taxes should be levied so that the most benefits for the citizens would be reached through the least taxation of such. As you said - Cayman islands and DE tax foreigners/consumers in order to benefit locals/workers. Not all governments have a luxury of plenty of foreigners to tax, in fact most don't.. – littleadv May 13 at 17:00
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@littleadv those paradigms and ideologies are not an absolute, sorry you feel that way. – CQM May 13 at 17:53

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