GEORGE TOWN, Cayman Islands--Its islands are lined with sun-swept shores and pristine beach resorts. But the Cayman Islands may be known more as a haven for international tax dodgers than for winter tourists.
Only about 51,000 people live on three islands that cover an area less than half that of the 23 wards of Tokyo and have no direct tax. But 90,000 companies list the islands as bases of operations.
Olympus used several investment funds to funnel money used to cover up losses from securities investments for years, including one that had a registered address in a five-story building facing a beach frequented by divers on the Cayman Islands.
That fund handled 31.9 billion yen ($414.4 million) for Olympus.
The building has all the appearances of a resort, from palm trees to a blue-green roof and rainbow-colored veranda.
A man with "Maples" written on the chest of his shirt came out to stop any picture-taking of the building.
He was affiliated with Maples and Calder, an international law firm based in the building that has helped companies set up headquarters in the Caymans and provides advice on their operations.
More than 18,000 companies use the building as their registered address, including financial subsidiaries of Japanese banks and trading companies, as well as the holding company for Baidu Inc., China's largest Internet search engine.
The registered address of another investment fund used by Olympus was a three-story building several kilometers from the coastline.
The reception area had the name of a financial services group. When inquiries were made about the fund, an official only said comments could not be made about specific clients.
Many companies registered in the Cayman Islands use post office boxes as their mailing address. The only post office on Grand Cayman island had a wall of silver post office boxes. Law firms that serve as agents for the companies collect the mail delivered to the boxes.
Copies of registration information can be obtained through the Internet for 30 Cayman dollars (about 2,816 yen). However, the document only contains the name of the company, its address and the date it was established. There are no entries about the company's capital or the names of its executives.
An inquiry at the registration office for more detailed information only led to the response that the information on the Internet was all that was available.
However, some information can be obtained through other channels.
The Chinese company that acquired electronics retailer Laox Co. is registered in the Caymans. However, the address it used was unclear. Asking about the location at a nearby law firm led to a call to the registration office that produced a more specific address.
Officials on the Caymans have taken steps to clear up its reputation as an international tax haven.
The British nonprofit organization Tax Justice Network says that about $255 billion (about 20 trillion yen) in tax revenues are lost due to tax havens. The Group of 20 economies is also viewing the matter with concern.
However, Cayman Islands officials argue that they are no longer a tax haven because the Organization for Economic Cooperation and Development in August 2009 removed the territory from its gray list of nations that have inadequate transparency in tax matters.
In 2005, a Tax Information Authority was established, and the Cayman Islands has already signed tax treaties with 27 nations and regions.
Duncan Nicol, the first director of the tax authority, said it would collect and provide any information asked for by tax treaty nations. He added that companies or individuals that conceal information will be subject to punishment.
That may be one reason for the huge decrease in direct investment from Japan.
Japanese investment in the Cayman Islands was 1.2 trillion yen in 2009, exceeding the figure invested in North America. But in 2010, the Japanese figure was a minus 158.3 billion yen, meaning more money had been removed from the islands than put in.
Even with the greater transparency, there are still huge benefits from the tax-free structure of the Caymans. Much of the revenues for the islands comes in the form of import tariffs and registration fees for companies.
Richard Coles, a former attorney general in the Caymans who is now chairman of a financial industry organization, said that introducing income and corporate taxes would not be feasible since the costs for collecting such taxes would exceed expected revenues.
There are only two workers in the finance ministry.
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