Leaking rig used Cayman to cut tax bill

| 15/06/2010

(Bloomsberg Business): Transocean Ltd., owner of the Deepwater Horizon offshore rig leaking oil in the Gulf of Mexico, reduced its US tax bill by almost $2 billion since 1999 when it moved its headquarters to the Cayman Islands, a published report said. Tax Notes magazine, a weekly journal published by Tax Analysts, said Transocean’s filings with the Securities and Exchange Commission show it cut its overall global tax rate to 16.9 percent in 2009 from 31.6 percent a decade earlier after moving from Houston. Transocean is seeking to limit its liability for the ongoing oil-spill that resulted from the April 20 explosion of the Deepwater Horizon rig, which killed 11 workers.

 BP Plc, which owns the offshore oil lease and had contracted Transocean to drill the well, has primary statutory liability for spill clean-up and restoration costs that could top $23 billion, according to a June 2 Credit Suisse analyst report.
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  1. Tim Ridley says:

    Actually, I do not live in a condo on Seven Mile Beach. I was simply pointing out that the dump is already a major deterrent for any prospective buyer who looks at the view to the North Sound from the penthouse floors.

    The financial transaction tax only makes some sense if our competitors also levy it. A far better idea is to let other places impose such uncollectible taxes and enjoy the additional flow of funds and transactions to Cayman.

    I entirely agree that our financial institutions here should sharpen their pencils and reduce some of their egregious charges. But, as with supermarkets and car dealers, the best way to do this is to encourage more competition.

     

     

  2. Tim Ridley says:

    1. A sensibly structured community service charge (CSC) can be combined with a reduction in the upfront stamp duty on sales and might actually help revive the current poor real estate market.

    2. Appropriate exemptions and varying bands can be included to ensure a fair system with protections for the genuinely poor.

    3. The funds raised by the CSC can be specifically dedicated to waste management/the environment, police and emergency services. These are all services that property owners enjoy and should therefore help pay for.

    4. Many of the most strenuous local objectors to the CSC themselves own properties in jurisdictions where there are property taxes, eg the USA and UK, and presumably find it entirely acceptable to pay those taxes in consideration of the services provided by the local governments. It is odd therefore that they do not accept the same position here.

    5. Many other competitor jurisdictions already have property or similar taxes – the Bahamas, Bermuda, the BVI, the Channel Islands and Switzerland to name a few.

  3. Tim Ridley says:

    I do not hold any particular brief for the financial services or any other sector. But I know that the financial services sector would take issue with the suggestion that it has enjoyed a free pass in the Cayman Islands. The evidence is very much to the contrary as a number of economic impact studies have shown.

    I and many others would be the first to support additional revenue generation from the financial services sector and its clients, such as the likes of Transocean. But only if the additional revenue could in fact be realised and in an efficient way. The reality is that financial services and global capital are very mobile. And we are in a very competitive world. Experience shows that if a jurisdiction becomes uncompetitive, because for instance the operating costs become too great or another jurisdiction offers a more attractive regulatory environment, then the business will move or not come here. It is as simple as that.  

    The George Town landfill environmental risk is something we as a community (not Transocean or BP) have to deal with and pay for. It is (sadly) our dump and our responsibility. My point is that the most logical, proper and perhaps only source of the revenue to pay for the cleanup and proper waste management going forward are property owners here, as they have the most to lose and the most to gain. Failure to address the problem will adversely impact property prices; a sound waste management regime will help property prices.

    Sadly, nothing in the three year plan just presented to the Legislative Assembly even starts to address this issue.

     

    • Anonymous says:

      Real estate is also highly competitive. Cayman doesn’t have a monopoly on beachfront.  Put in property taxes and watch the market tank further. The answer is that the current level of receipts (they are still well into nine figures) should be enough to run any 100 sq. mi. island. Cayman government needs to live within its means and not siphon ever more money out of the private sector.

      It’s frankly beyond me why the citizenry puts up with the ultra high duty they must pay on practically all of life’s necessities (other than Rolexes and other bling) in order to support the bloated public sector.All I can figure is that there must actually be more citizens in public service than in private employment.

    • Anonymous says:

      Tim. You say you don’t have a particular brief for the Financial Services sector but then you proceed with your "boogey man" fears of suggesting that all the business is going to go elsewhere if we implement taxes so as to ensure the Cayman Islands can pay it’s way. Like the bankers, you intend to suggest that a nominal fee on deposits that would ensure that the Cayman Islands have the resources to fight/reduce crime, to ensure the highest level of education for its youth/future, to ensure that the Cayman Islands can pay its bills without going "hat in hand" to our "mother" country, so that we can clean up our material and financial toxic messes would run business away. At the same time, company managers charge significant fees, and the bankers charge a minimum of 1% (sometimes multiple times per year/month/week/day) to simply SEND THE MONEY AWAY from the Cayman Islands.

      Come on Tim, do you really consider this just or justifiable? Even the "mother" country sees what we will not acknowledge; that we need more revenue from direct forms of tax, not just budget cuts-which I am all for but not so that the freeloaders can get their fees reduced and the Holy Grail protected. Don’t we understand that we are paying income taxes? Just not to the Cayman Islands.

      We are paying income taxes to Canada and other countries when the inflated profits (by highercosts to us) help their Caymanian branches send them profits from which they proceed to take their 10%, 20%, 30%….

      If you do a "quick and dirty" estimation you will see why the Cayman Islands is in debt. We have repatriated inflated profits to foreign countries for decades and now it has caught up with us as this was not a sustainable way to live. But as usual, most docile Caymanians will sit idly by and watch as all of the Financial Centres impose their financial services taxes and we get nothing!

      Of what use is a sector if it is not cash flow positive? The Financial Services Sector would like to convince the general public that it is the Holy Grail. But I suggest it is sucking our energy dry trying to protect it but we are not being equitably compensated for the tremendous benefits it provides to those who benefit from using the Cayman Islands. A prime example of this is our shipping registry which makes absolutely no profit from its operations BUT AT LEAST WE CAN BRAG ABOUT HOW HIGH IN STATURE WE ARE (while it contributes nothing to the infrastructure its employees use daily).

      Finally, I have previously seen you come to the defense of the Cayman Islands against our "mother" country when (at least I believed) our "mother" country was wrong so I have little doubt as to your commitment to the Cayman Islands. I firmly believe that it is time for good men like yourselves to considerthat there is need to reconsider your position regarding "losing business" as if the business does not understand that a crime-free, financially (and as a result of, socially) stable country is a better place to conduct business, then maybe we should not have that business (if they have no interest in our wellfare).

       

       

    • Anonymous says:

      I agree with Mr. Ridley that it is sad to see that there is nothing in the Govt.’s plan to address the landfill. However, isn’t it amazing how it is when something affects us personally, that we want something done? Mr. Ridley (God bless him) doesn’t like his view from his multi-storied condo and thinks that it is the most pressing thing for us to deal with.

      How can we concentrate on improving his view; mind you I believe that the dump borders on a  national disgrace, when thieves and robbers are destroying the country, and we have schools that can’t be finsihed, people are out of work…

      Yes, the garbage needs to be dumped but lets do it after we tackle more immedaite/presssing matters-like how to close a $70 million budget deficit so that we can recommence the schools/get employment for people and  some cameras over the country so we can help fight crime.
       

       

  4. Anonymous says:

    Well said Ridley!

  5. Mike Hardy says:

    Tell me are oil rigs registered in Cayman regulated in any way?

    Do they have to meet any safety standards?

    I know silly questions!

    Bermuda doesn’t either!

  6. Anonymous says:

    Why can’t we get some responsible investigative reporting? Yes; Transocean Ltd. may have saved $2 billion in taxes by being incorporated in the Cayman Islands-and this has been my argument since prior to 2005; Why do the residents of these islands keep having to pay higher consumption taxes as corporations SAVE $2 billion in taxes by using us? How obscence is this? But I digress…

    Since 18th. Dec. 2008, Transocean Ltd. has been headquartered in Switzerland! But the headlines do not read "Swiss incorporated  Transocean Ltd…." Can I ask the editor to change the article by opening with that clarification? Then we can focus on the fact that we allowed Transocean Ltd., while they were incorporated here, to SAVE $2 billion in taxes (and PROFIT EVEN MORE) to use us while Caymanian families are made to pay exorbitant consumption taxes. This is not only injustice, this is absolute madness.

    • Anonymous says:

      You must feel better now that they are using Swiss families to save taxes now.

      • Anonymous says:

        I agree.  I just thank god they have stopped exploiting the poor people of the cayman islands. 

  7. Tim Ridley says:

    Of interest as a small footnote is that Transocean is actually now domiciled in Zug, Switzerland, where it moved in 2008, to take advantage of Switzerland’s double tax treaty network.

    The tax domicile of the oil companies and drilling companies has little, if anything, to do with the environmental disgrace/mess in the Gulf of Mexico. But the tax savings might just enable the companies that are liable better to be able to pay the clean up costs and damages to those who have suffered. 

    Those who are concerned about environmental hazards and how to pay for the clean up might like to ponder on Cayman’s growing potential toxic hazard, the George Town landfill. And rather than waving the "no taxation" flag, to think longer term about how we are going to pay to sort out that nightmare. A community service charge tied to property might just be the best solution. And even my real estate friends might be persuaded of this as their pockets will be directly hit if we do not solve the problem. For anyone who has any doubts, go to the top floor of any of the multimillion dollar developments on SMB and look to the North Sound; you cannot miss it! 

    • Rick James says:

      I wish I had more hands… I would give this post 4 thumbs up!

    • Anonymous says:

      Mr. Ridley and Mr. James. Explain to us all, how Transocean, SAVING $2 Bllion in taxes or BP who we also probably helped save on taxes, is going to help us Caymanians pay for the cleanup of our toxic mess? Come on Mr. Ridley, I always thought you were more Caymanain than this. My points were as follows. We allow these companies who (you and) many in the financial sector continue to protect against taxes of any type while suggesting that we locals pay for our toxic mess while affording these companies  a FREE PASS to create a financial TOXIC mess for us to clean up. I consider that it is time that  your HOLY GRAIL of the financial sector not be given the free pass it has for the past decades.

       

  8. Raffaele says:

    As usual we are at the bottom of every bad deal as Mr Travers and his merry men and story tellers move around it appears luck and time is not on our side it seems what we have sown we now must reap and the taste gets even more and more bitter each time. Yes now they will come and throw cold water and spin control on such stories and tell us this will have minimal effect on us Yet the Cayman name and brand is degraded yet a little further each time. Not a problem for those well to do businessmen in their white shirts, glass towers and foreign passports. Yet they tell us this is all good, but for who?. It was sure funny how the UK government was so quick to defend UK business in this Environmental Catastrophe in the Gulf of Mexico concern only about the fallout of their financial interest. Lost was the 11 men the thousands of dead sea creatures and marine life and the destroyed lively hoods of the gulf coast residents. BP response was to pay dividend to shareholders yes Cayman pay attention and learn. Now we learn as usual Cayman is part of this now huge environmental problem what will our spin doctors and idiot politicians come up with now  as they travel the world sign treaties and shaking hands. Yes we must be grateful for our Foreign guest and embrace their business and cater and alter our immigration policy to their every whim. None are so blind as those who have their eyes wide open yet they cannot see. Poor old Cayman getting the same old raw deal.

    • Caymanite says:

      You ask who all of this is good for?  Ask the 6000 civil servants who would otherwise be unemployed if it were not for Cayman’s financial services industry paying their salaries.  That is who itis good for.

      • Anonymous says:

        Thank you for saying that.  also all the merchants that then benefit as the civil servants money spreads through the community.  And the social programs funded by fees on this business.

      • Caymanmight says:

        What if a man gains the whole world and loses his soul. As normal some same to think they are the be all and end all of Cayman’s economy and should be worshiped as gods.

  9. Caymanians for Good says:

    I figure it would not be long before the Cayman Islands would show up in the US in this mega-eco disaster. At least it is not for ‘causing’ it yet. Wait until Obama’s government get the spin going on this one!