JCSM Shareware Collection 1993 November

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No-Tax Havens: Balmy Climes for Money and Man Over the last sixty years most people have come to accept taxes as a basic, inalienable part of life, a sort of necessary evil. There are, however, places where there are virtually no taxes. And, wonder of wonders, most of them have good governments, "good" in the Jeffersonian sense of governing little. These no-tax countries share some basic similarities, which are important to anyone considering forming a corporation or trust in one or another of them. These factors need to be kept in mind when forming a judgment about the likelihood of the governments of these countries violating their no-tax traditions. All of the no-tax havens considered in this chapter are island, or archipelago, societies. Foreign invasion is most unlikely, and defense budgets are minimal to nonexistent. All have ethnically mixed populations, native peoples and white immigrants from Europe and America. They have almost no racial friction and are peaceful and nonviolent, so the "war against crime" as a major motive for taxation to support large government outlays for police activities is happily lacking. Because of their multi-island geographies, all of these havens are free of strong central government. Where government officials have to use motorboats or even canoes to get around, their mobility is reduced and, correspondingly, so is their control. None of these countries share the European and American notions of technologically oriented living standards. The idea that someone is "socially underprivileged" because he does not have a late-model car would seem odd to a citizen of any one of these lands, and welfare policies are nonexistent and very unlikely to be introduced in the future. Every one of these no-tax havens has a British colonial background and is a member of the British Commonwealth. While the present ultrasocialist British government is a supertaxing government, these little Commonwealth countries still operate on the "imperialist tradition" of nineteenth century British colonial policy, which typically excluded all local taxation. Moreover, the legal tradition in all of these places is that of the common law uncorrupted by socialist legislation, and the official language is English. Finally, all of these nations, in view of their restricted land areas, depend on tourism and foreign investment for economic success. The tax haven industry is an economic necessity for each of them, and any attempt to change this by future leftist governments is improbable to say the least. All in all, the consideration of stability is very much in favor of these no-tax havens. They have been no-tax countries for many, many years, and they have both traditional and practical stakes in staying that way. However, all these havens share a major disadvantage: It is very difficult to establish plausible business reasons for incorporating in them. The names Bahamas, Bermuda, and Cayman Islands are immediately suspect in the eyes of any tax collector. This means that a Bahamas, Bermuda, or Cayman Islands corporation would best be formed indirectly by a corporation in another haven. A related reason for considering these havens only in terms of a double- or multi-tier arrangement is the fact that one might want to derive tax-free (or tax-reduced) income from high-tax country sources. No-tax countries do not have double-taxation agreements, so a corporation located in one, if directly receiving income from high-tax sources, would be subject to the full withholding tax on gross profits. On the other hand, as a second company in a multi-tiered structure, not receiving income directly from the high-tax source but from another corporation in a low tax double-taxation-agreement haven, such an outfit can be highly useful. And since these no-tax nations do not have double-taxation agreements, they have substantial privacy advantages, which are enhanced by local codes, official and unofficial, that derive from the healthy vested interest of local governments in cultivating the tax haven industry. Before we discuss the specific no-tax countries in detail, a word about how their governments raise the little revenue they need to stay in business. The principle sources of government funds in these nations are stamp duties; legal fees, under various descriptions, payable for incorporation and legal maintenance of a company; and import duties. There are similar sources of government revenue peculiar to each of these countries (such as the "bicycle fee" in the Cayman Islands). We will mention these, to the extent that they are relevant, as we go along. The Bahamas. This is a very traditional, very central tax haven. Geographically, it is an archipelago. It is composed of 700 islands and uncounted rocks and reefs, stretching from Haiti on the southeast to Florida on the northwest. It has a total land area of 5,400 square miles, scattered over 70,000 square miles of ocean. The Bahamas are usually associated with pleasant tourism. Clearly, a country where the major means of transportation is boats sailing across vast stretches of tranquil ocean has its fascination. The pleasant climate is an extra consideration. The sun almost always shines; the temperature varies only slightly the year round, from an average minimum of seventy degrees Fahrenheit to an average maximum of eighty. An archipelago like the Bahamas can only be organized politically and economically if there is some major island to serve as its center of trade and government. For the Bahamas, this is New Providence. It contains 50 percent of the total population and the capital, Nassau. Economically, the Bahamas thrive on tourism, the tax haven industry, and the export of petroleum products, cement, rum, salt, and ocean products. It has no heavy industry, but the export trade is a good business reason for being there. The Bahamas are highly accessible. Nassau can be reached by air from any major airport in the United States, and it is but thirty-five minutes flight-time from Miami. There are direct flights from London, Toronto, Jamaica, Bermuda, Frankfurt, Cologne, Brussels, and Luxembourg. Communications are no problem at all. Everyone speaks excellent English, and airmail, telegraph, direct-dial telephone, and telex services are of the highest quality. The Bahamas are a sovereign state within the British Commonwealth, independent since 1973. Commonwealth membership means that Her Majesty the Queen is head of state, and she is locally represented by the appointed governor general. This provides a measure of safety because the governors general have traditionally been very conservative. The legislature is bicameral, the upper house appointed by the governor general on the approval, recommendation, and joint agreement of the prime minister and the leader of the opposition, and the lower house popularly elected. The upper house can delay any legislation, though eventually it must approve it. The governor general can veto any legislation he deems inconsistent with the constitution. However, there are political snakes in the Bahamian paradise. The government has created problems both in the granting of work permits to aliens and in exchange-control matters. Both difficulties derive from programs of "Bahamization of the economy" and "social development." However, the same government has also put into force some programs of encouragement to foreign investors and tourism, so the situation is less ominous than some rumors would have it. Moreover, the government has repeatedly promised that it will not buck the no-tax tradition. As noted above, the legal system of the Bahamas is grounded on the English common law. This tradition is implemented by a four-level court structure: local magistrates, magistrate courts for more serious matters, a supreme court, and a court of appeals. The ultimate court of appeals is that of the whole Commonwealth, the Queen's Privy Council. The currency and exchange control picture is not a rosy one. The local currency, the Bahamian dollar, is on par with the U.S. dollar, but it does not freely circulate with it. Exchange controls are quite strict, especially as applied to so-called resident companies, those owned by a local resident and doing business locally. These companies are only allowed to operate with local dollars and to pay foreign bills with U.S. dollars exchanged according to the official rate, each time with an express Exchange Control permission. This can be an important consideration if a local shareholder-owner (proxy) is needed to set up a tax haven company. There are ways to avoid this difficulty. One is the formation of a nonresident company funded by a non-Bahamian company headquartered in another haven. Another arrangement is to get a general approval from Exchange Control to convert freely between local and foreign currencies on the basis of evidence that the nature of the company requires such freedom to do business effectively. Such a license for a resident corporation involves an extra obligation: an annual report to Exchange Control on the company's foreign accounts and transactions. Only a nonresident company owned by a nonresident and operating exclusively outside the Bahamas can do business with complete freedom of exchange between currencies. This exchange control problem, coupled with difficulties that may be faced in getting a work permit for any non-Bahamian worker one might wish to employ may be reason enough for some investors to look elsewhere for a haven. Still, there are thousands of corporations registered in the Bahamas, which indicates that, while they have become slightly less attractive as a haven, they still have their advantages. Let us concentrate on these advantages. Whatever professional services one might need--law firms, accountants, banks, finance companies, investment advisors, stockbrokers--are available in abundance. They are of an internationally high quality, too, based on a longstanding and thriving tax haven industry. As for the tax laws, there are no personal income taxes, no corporate taxes, no profit taxes, no capital gains taxes, no estate or other death taxes. On the island of New Providence there is a tax on the value of improved land. A more serious qualification is the tax on local gambling casinos. After all, the government must get its share of this lucrative element of the tourist industry! In accord with the general no-tax situation, there is no withholding tax of any kind. If one is a worrier, he can even incorporate in the Freeport area and get a thirty-five year warranty against the imposition of any future tax, should one be imposed. The Bahamas are one among many tax havens that have such no-tax warranties. It is hard to say what the value of these is, if any, because a future government taking the extremely unlikely revolutionary course of introducing taxation may well refuse to respect such promises of preceding governments. Still, it is a nice touch. The lack of any significant taxes in the Bahamas does not mean that anyone incorporating there will get off scot free. After all, the local government does deserve something in return for providing a tax haven. Whatever one pays, however, will bear no relation to his profits. There will be stamp duties on the documents of corporate registration and an annual business-license fee. The rates are quite competitive with other tax havens. What kind of business entities can one form in the Bahamas? How? At what cost? There are two basic types of corporations: companies limited by shares, and companies limited by guarantee. Both types belong to the general kind of corporate entities discussed in part one, but there are certain differences. Companies limited by shares have a fixed, unmodifiable authorized capital. They cannot buy back their own stock. However, a shareholder's liability is limited to his stock. If the stock is fully paid-up and the company goes bankrupt, creditors have no recourse to any of the shareholders' personal assets. Companies limited by guarantee can reduce their share capital by buying back their shares and canceling them. This means that they can present their creditors with an unpredictable security situation. The security for bonds, debentures, and other loans is, of course, the total authorized and real capital of the corporation. If it can be reduced after bonds have been issued or loans taken out, this means that the company is legally entitled to reduce the initial assets against which it took out loans. To protect debtors in such an instance, shareholders' personal guarantees for some extra sum beyond their own investment is legally introduced. Offshore funds, with their typically expanding contracting capital, are therefore incorporated in the Bahamas as companies limited by guarantee. Anyone who decides to participate in the tax haven industry through an offshore fund based in the Bahamas should read the "fine print" very carefully. Incorporating in the Bahamas requires the services of a local lawyer, who will prepare and file a memorandum of association and articles of association. Both documents are standard, and the first includes the name of the company, the address of its local registered office, its general purpose and objects, a declaration that it has limited liability of the relevant sort, and the company's capitalization (total authorized capital, the number and kind of shares, etc.). The articles of association specify the number of corporate directors and regulations concerning annual directors' meetings. On the latter point, the directors can meet anywhere, not necessarily in the Bahamas. "Alternative directors" can stand in for the regular directors, and a circular, agreed to and signed by a majority of the directors, can have the same official standing as any decisions reached by a majority at a regular directors' meeting. The local law firm handling incorporation will charge certain fees: the charges for preparing documentation; the costs of providing five local nominee shareholders (who will sign a "deed of trust" turning over their shares to a principal after incorporation); the costs of maintaining (according to longstanding, though unwritten, tradition) a local nominee director; and the cost of "office representation" in the Bahamas (a sign displaying the company name must be posted on the building in which the registered office is located). In addition, there are these statutory requirements that must be met: a register of directors, a register of shareholders, and a minute book must be maintained in the local office, and an annual return must be submitted to the Registrar of Companies, specifying shareholders, directors, officers, the address of the registered office, and amount of share capital. As against government fees, which are fixed, there is some variation in the fees for the above services. On the average, initial incorporation costs run about $2,500. Of course, one can shop for the least expensive services and do a bit better. The Bahamas common law tradition also provides for trusts, which can be arranged through local trust companies. No government fees are involved because a trust is a privately constituted entity that derives its existence from a trust deed and a trust fund, not from government registration. The local trust law allows a "Cuba clause," which means that if, by some strange course of events, the Bahamas becomes a "people's democracy," the trust would automatically revert to some other country where there is a "stand-by" trustee. The use of such a clause, of course, requires that the trust assets be outside the Bahamas. Bermuda. Bermuda is similar to the Bahamas in many respects. Like the Bahamas, it is made up of islands, seven main ones, connected by bridges, and many small coral formations, accessible from the main ones by boat. It is situated about 600 miles east of Cape Hatteras, North Carolina, and so, like the Bahamas, it is close to the East Coast. Its land area, however, is much smaller, a mere 20.5 square miles, of which two are occupied by U.S. military bases. The remaining area is densely populated. Understandably, land purchases in Bermuda are difficult, both legally and financially. This is reflected in office rentals and so on. Bermuda is a tourist's delight. It has a very moderate climate and is warmed by the Gulf Stream. Its area is hilly, with beautiful banks of flowers and lovely rainbow hued houses. It is highly accessible. Daily flights connect it with any major city in the world; it is but two hours from New York. It is located at the crossroads of the shipping lanes between the United States, Canada, North Europe, South America, and Oceania. Direct-dial telephone, cable, telex, and airmail services are excellent. There are few political differences between Bermuda and the Bahamas. Bermuda is a self-governing crown colony and so is not a fully independent Commonwealth member. Like the Bahamas, it has a governor general, appointed by the Queen. This illustrious official has larger responsibilities than his Bahamian counterpart. He handles foreign relations (in accordance with British policy), security, and police. All other affairs are monitored by the democratic institutions of the colony. The legislature is bicameral, with an appointed upper house (the Legislative Council) and an elected lower house (the House of Assembly). The governor general heads the cabinet (the Executive Council). Despite foreign affairs and defense relations with Great Britain, there exist no governmental financial relations between the colony and the mother country. All Bermudan officials, including the governor general, are paid out of local government revenues, and Great Britain gets no tax money from Bermuda. Thus, the high British taxes have no bearing on the tax situation in Bermuda. The self-governing nature of Bermuda means that any changes in the tax laws or other legislation cannot be imposed from without; they can only emerge from the local legislature. The legal tradition in Bermuda derives from an ancient, pre-1612, British common law, modified by locally generated common law. The legal framework is three-tiered: magistrate courts, a supreme court, and a court of appeals. As in all Commonwealth countries, the ultimate court of appeals is the Queen's Privy Council in London. The local currency, the Bermudan dollar, is on par with the U.S. dollar. As in the Bahamas, there are exchange controls on residents and resident companies. Bermuda is similar to the Bahamas in having a large range of high quality professional services available. Very strict banking legislation has resulted in there being only four banks, which, by law, are locally controlled; local stock ownership, combined, cannot legally fall below 60 percent. The British tradition in Bermuda means that there are strong ties between accountants, lawyers, trust companies, and banks. Once one chooses his accountant, say, this gentlemen will "strongly recommend" the lawyer, trust company, and bank to be used, stressing that he is "accustomed" to working with them. This may seem a bit restrictive, but it guarantees good cooperation between firms that otherwise might not cooperate in one's best interests. As in the Bahamas, local bank deposits have certain attractive features; the depositor can choose the currency, there is no withholding or other tax on interest, and he can have a joint account with his spouse allowing that he or she is to have immediate title to the assets in case of the other's death. If, though, both account holders die at the same time, any heirs will have access to the account only by reference to a properly executed will approved by a court, and the will will be a matter of public record. As for taxes, there is no personal income tax, no corporation tax, no profits tax, no capital tax, no capital gains tax, no withholding tax, no inheritance tax. There are import duties and a 10 percent property levy on the rental value of houses and land. To take advantage of this happy situation, one can either incorporate or form a local trust. Incorporation in Bermuda was made simpler in 1970. Previously, any incorporation required a special private legislative act. To incorporate one had to offer a petition to the local parliament through a legal representative. The legislature would then vote on the proposal and, eventually, approve it. This superceremonious method of incorporation still exists and must be used if any aspect of the structure, internal organization, or mode of operation of an intended company deviates from the pattern dictated by the General Corporation Law enacted in 1970. However, if the corporation is a "normal" one, incorporation can be accomplished without such legislative ceremonies by submitting the standard type of documents for the Registrar of Companies to approve. There are two basic types of companies recognized by Bermudan corporate legislation, local companies and exempt companies. Local companies are those formed by Bermudans for purposes of internal trade or Bermuda-based international trade (import to and export from Bermuda). Such companies have a minimum percentage of local stock ownership, prescribed by law, are subject to strict exchange control, and have no guaranteed immunity against future taxes. An exempt company is free of the first two restrictions above, and is given an official guarantee against the levying of future taxes for thirty years. However, an exempt company is restricted as follows: (1) It cannot buy, lease, or sell land, mortgages secured by land, or bonds and debentures secured by land without special permission. (2) It cannot buy shares of local companies. (3) It cannot locally sell whatever it produces without special ad hoc permission. These limitations narrow "business justification" possibilities for Bermudan incorporation, to say the least, and there is no way around them. Incorporation in Bermuda is more difficult than in the Bahamas. Taking into account the various professional services that are needed for incorporation as well as the high government fees, both incorporation and annual maintenance run to $2,000-$2,500 a year depending on the specific services required. In addition to the financial burdens, there is a "screening" of incorporation applications. A committee chaired by a member of Parliament examines bank references to eliminate Mafia types and such. This screening slows things up, and may take a month. Bermudan trusts are much less costly. A stamp duty of 0.25 percent of the initial fund (plus the same percentage on any later increase in the fund) is the total governmental cost. A trust is not locally taxed on its profits, but if its beneficiaries are aliens, it cannot, in view of the land scarcity, invest in local real estate without special approval from the Executive Council--which turns a deaf ear to all such requests. Even if the disadvantages noted above do not discourage a potential investor, the Bermudan political and social situation may. There is a policy of "Bermudization." There are problems with immigration and work permits for aliens; hiring a local office is difficult in view of the land restrictions; the distinction between local and alien companies is very strict. There has already been an attempt, defeated in Parliament, to introduce an income tax. Local companies pay a 5 percent "payroll tax," which means that on each $100 an employee gets, the company has to pay the government an extra $5. This does not apply as yet to exempt companies and they are, moreover, guaranteed against it. But this is a bad sign for a tax haven. (Remember, the U.S. income tax started at 5 percent.) There is also some racial tension between whites and blacks (60 percent of the population is black). Thus, given a choice between Bermuda and the Bahamas, the Bahamas may make the better bet. The only advantage Bermuda seems to have is the extra respectability conferred on Bermudan companies by the screening process. The Cayman Islands. To assert that the Cayman Islands are superior to both the Bahamas and Bermuda as a tax haven is to assert an opinion. To point out that many tax haven companies, established firmly for many years in the Bahamas and Bermuda, have recently transferred their bases of operation to the Caymans is to point out a fact, a fact worth paying attention to. Like Bermuda and the Bahamas, the Caymans are--obviously--a collection of islands. There are three of them, located 475 miles south of Miami and 200 miles north of Montego Bay. Of the three, Grand Cayman, as its name implies, is the major one; it is there that both the capital and most business activities are located. Its area is significantly greater than that of the other two, seventy six square miles, as against Cayman Brac's fourteen and Little Cayman's ten. Cayman Brac is east of Grand Cayman, and Little Cayman lies between the two larger islands. This trio is rather hot. The only factor differentiating the tropical nature of the Caymans from West Africa is the trade winds, which cool them off--a little. The Caymans are about five times larger than Bermuda and they are much less densely populated. Thus, the Bermudan "land sensitivity" reflected in harsh strictures on land purchases by foreigners and in high real estate costs has a very moderate counterpart in the Caymans. Being a tax haven is for the Caymans, like Bermuda and the Bahamas, a tradition based on British rule. Here, however, the tradition is bolstered by a legend. In 1798 the islanders heroically saved from tragic death at sea a British royal prince and his mentor, an admiral, and King George III gratefully granted the islanders eternal tax exemption. Scholars may concern themselves with the authenticity of the legend, and its legal significance at present is dubious. But it is very significant as a predictor of the future; such a strong tax haven tradition would make it very difficult to introduce any sort of taxation. Not that there is any special reason to worry about the Caymans, as there may be with Bermuda and the Bahamas. The latter two are not, from the point of view of governmental economic and foreign policy, enthusiastically dedicated to being havens. They became so only as a by-product of their total no-tax tradition. The Cayman Islands government, on the other hand, is very keen on the tax haven industry, a major factor in local economic growth. Thus, the consideration of expected future stability favors the Caymans. It is important to see, therefore, whether they are inferior to their competition in other respects. One can fly to the Caymans from Miami or Kingston, Jamaica. There are adequate airmail, telephone, telex, and cable services. Politically, the Caymans are a crown colony by choice. In 1962, when Jamaica became independent of Great Britain and the Caymans were a dependency of Jamaica, the Caymans decided by national referendum against independence or a Jamaican connection and for the status of a crown colony. This indicates a rather unusual traditional conservatism in this era of "national independence" and the "fight against colonialistic imperialism," and it is a strong predictor of stability. The local population is racially mixed, but mixed in the right way. There is a minority of pure Europeans (20 percent) and pure Africans (20 percent) and a racially mixed majority (60 percent). This indicates that racial tension, prejudice, segregation, and such, were never serious factors in the Caymans and are likely to become even less so. This, again, is important because leftist governments often come to power employing racial strife as a major crutch. Here leftists would not have much to lean on. The government is headed by a governor general, an appointee of the Queen. He heads the Executive Council, his cabinet. The council members are partially elected, partially appointed by the governor general. There is a one-house legislature, the Legislative Assembly, elected by universal suffrage. Recent elections and day-to-day political life do not indicate any basic left-right polarization. The Caymans are a politically quiet place. The law is British common law modified by local legislation. The court structure is similar to those of Bermuda and the Bahamas. Corporate legislation is modernized and efficient. Exchange controls are somewhat less strict than in Bermuda and the Bahamas. They involve major restrictions on local residents, but a "nonresident" company dealing outside the islands can be formed, eliminating all exchange-control considerations. The only restriction on such a company is that it cannot use the local currency. The Caymans' superiority over the Bahamas and Bermuda is not modified by a comparison of available professional services. A broad range of high quality legal, banking, accounting, finance, and trust services is available. The Caymans' tax structure is superior to those of Bermuda and the Bahamas. The only sources of government revenue are stamp and import duties. An automatic no-tax guarantee of twenty years is granted to nonresident exempted corporations, and there is a fifty-year guarantee to trusts. There is virtually no tax department. Incorporation is quicker, easier, and cheaper than in the Bahamas and Bermuda. A memorandum of association, involving three initial shareholders (which a legal representative can supply as proxies), is required. It has to specify the usual details: name of corporation, address of its local registered office, statement of purposes, statement that it has limited liability, and its capitalization (amount of authorized capital, division into shares, and par value of shares). On payment of a registration fee, the Registrar of Companies issues an immediate certificate of incorporation and files the memorandum. There is no Bermuda-type investigation of bank references. Maintenance of a corporation is quite reasonable. An annual fee is required, as are the standard office services, supplied by an agent for a modest fee. This same agent will also submit the required annual return to the government. This has nothing to do with finances. It merely specifies the name of the company, the address of the local registered office, the authorized capital, the issued capital (total par value of issued stock), and the names and addresses of the nominal shareholders. This annual return has to be accompanied by an annual fee. Total costs of incorporation run about $2,500--the only constant being the government fee, while the agent's fees vary. Annual maintenance averages about $1,500. All of the above applies to an "ordinary" company. There are also exempt companies. The above mentioned twenty-year no-tax guarantee applies only to them. The fact that a company operates in trade outside the Caymans does not mean it has to be exempt. It is up to the incorporators to consider the relative advantages and disadvantages. An exempt company, apart from the twenty-year guarantee, can omit from its name the "Ltd." required of other companies, can issue shares without par value, can dispense with the formality of annual shareholder meetings, and can keep private, with no representation in any official records, the names of shareholders. Of course, all these benefits cost. Costs and annual maintenance run about 50 percent higher. Even with these fees, a Caymans exempt company costs about the same as a Bermudan nonresident company, and apart from the above advantages, it can also issue bearer shares, and there is no extra charge in the form of stamp duties on the transfer of shares. Another advantage of an exempt company is the possibility of redeemable preference shares, which at the time of liquidation have priority over ordinary shares in being paid up by the company to the shareholder but which usually have no voting power. Such shares can be useful if one wants to finance his corporation not by taking out loans but by issuing new stock without at the same time compromising control of the company. The reader may have wondered why articles of association were not mentioned above. The reason is that in the Caymans there is a "Table A" that substitutes for these uniformly in a manner that creates only minor inconvenience. This table is not a curse of uniformity but a blessing of not worrying over what are usually irrelevant formalities. One can at any time offer articles of association, modifying Table A as he wishes, leaving the table to apply automatically to matters not mentioned in the modification. The table is thus a legal convention created to enhance convenience of local incorporation. Of course, the common law tradition of the Caymans allows not only corporations but trusts. Trust companies galore compete to be of service. The trust deed requires a stamp duty and a nominal fee for official recording. However, total formation costs with an average trust company are only about $1,000. There are no undue limitations concerning either trust founders or beneficiaries, and, of course, no taxes on trust profits, which can accumulate and multiply nicely, enriched by whatever extra additions to its principal one may care to make. For an extra expense one can get the trust counterpart of an exempt corporation, the exempt trust. It has a fifty-year guarantee against future taxes, and its annual maintenance cost includes a yearly government fee. As against the exempt corporation, which offers a package of business advantages apart from the no tax warranty, the exempt trust is worthwhile only for the real worrying types, who seriously believe that in the Caymans any form of tax on incomes of trusts with foreign founders, trustees, and, possibly, assets will be introduced. As we have already indicated, the Bahamas are a haven for banks. Comparably, the Caymans are a real bonanza. The Caymans offer a large range of possible business activities. There is virtually no nationalistic spirit or land-scarcity anxiety, and bank privacy is strongly guarded. A governmental official who breaches bank privacy can expect heavy fines and a prison term. Clearly, the Caymans are superior in virtually every respect--future no-tax security, costs, expediency of incorporation, flexibility of corporate structure, business opportunities, privacy, immigration, and prospects for land ownership. The very positive government interest in the tax haven industry is also a big plus. While there is one other no-tax haven, Vanuatu, which is in some ways superior to the traditional havens of the Bahamas and Bermuda. It cannot compete with the Cayman Islands. Whatever the specific circumstances, the Caymans are tops, as the transfer there of many firms from the Bahamas and Bermuda confirms. Moving a corporate base of operations is costly, and it is not done unless the considerations in favor of the move substantially outweigh the costs.