At the Lew Rockwell.com, historian Eric Margolis describes the success story of Cayman Islands.
Two things happened to change Cayman from insect hell to the world’s second most important tax haven after Switzerland, and the fifth largest banking center.
First, an intense mosquito control campaign and swamp drainage killed most of the island’s insects. Second, the British Crown colony adopted a no tax policy and removed any restraints on the flow of funds.
The New York and London principals of the West Indies port, land and shipping group for which I was working at the time sent me to Cayman to open up banks. I chartered three, including my favorite brainchild, the German-Atlantic Bank.
Would that I had stayed in the banking business. My principals had remarkable foresight. Forty-four years later, Cayman hosts almost 300 banks, insurance firms of every type, and over 10,000 hedge funds managing some $36 billion in funds, as well as registries for ships and aircraft.
The population has grown to 56,000, nearly a third of whom are expatriate financial executives. The inflow of bank business has allowed life without personal taxes and a per capita income of $47,000, giving Cayman the highest living standard in the West Indies. Over 50% of government revenue comes from the finance industry.
With its azure waters, beautiful beaches, fine hotels, well-regarded restaurants, highly developed communications and public infrastructure, Cayman is a paradise for tourists and finance.
Now the coming risk:
By contrast, tax collectors everywhere hate Cayman.
The island’s ultra discreet banks are awash with hot money, particularly from Russia. In fact, almost every major business deal in Russia is run through either Cayman, Switzerland, or Cyprus (though it’s gone bust). This island is a world center for legitimate business but also financial hanky-panky and shielding money from taxes, angry ex-wives and lawsuits.
What makes Cayman so attractive is that it remains a British colony, meaning no revolutions or coups by wild-eyed fanatics. The island offers still largely impenetrable secrecy and a safe place for money. And, to quote Somerset Maugham’s wonderful description of Monaco, “a sunny place for shady people.”…
But Cayman, like other tax havens, is now under heavy fire from abroad. Last year, President Barack Obama singled out Cayman as a major financial malefactor. Revenue hungry governments across the globe are closing in on Cayman.
If "revenue hungry government across the globe" have been intensifying their leeching of their captive taxpayers, think of what may likely happen when a Black Swan event occurs.
