David Cameron realizes it will be difficult for him to stake his claim to be the world's foremost fighter against tax avoidance while his country's own territories—the Caymans, the British Virgin Islands, Bermuda—top the world's list of financial havens. So he's asked them to cut it out.
Fabian Picardo, chief minister of the British overseas territory, said multimillionaire hedge fund managers should quit London for Gibraltar because it's "much cheaper", while promotional material promises they are "unlikely to be liable for corporation tax".
Picardo, who has made attracting hedge funds a key aim of his administration, last week invited hedge fund managers to the peninsula where they were told income tax could be limited to £30,000 a year no matter how many millions they earned….
"The profits of any branch or permanent establishment of the investment manager are not subject to tax in Gibraltar, to the extent that those activities are undertaken outside Gibraltar." Corporation tax on activities undertaken on the rock is levied at 10%, compared with 24% in the UK.
Philip Tye, chairman of the Hong Kong branch of the Alternative Investment Management Association, a hedge-fund lobby group, said he expected more funds to domicile their products here because Financial Secretary John Tsang Chun-wah in February proposed to expand tax exemptions for private equity funds and to allow fund products to be structured more flexibly. Tsang made the proposal in his budget speech….
A law change in 2006 granted a tax exemption to offshore funds investing in stocks and futures. The new proposal would expand the tax exemption to offshore private equity funds that invest directly in companies. Tsang's other proposal was to allow funds domiciled in Hong Kong to be established as a company. They are currently required to be trusts….
That would double the number of private equity firms based in Hong Kong and create jobs for private equity fund managers and related professionals, Levack added.
Gibraltar tries to lure London hedge fund bosses with promise of low taxes [Guardian]
New tax exemption seen drawing hedge funds to Hong Kong [South China Morning Post]
Cameron begs tax havens to 'get out own house in order' ahead of G8 [politics .co.uk]