Ugland House is a building located in George Town, Cayman Islands. Located on South Church Street, the building is the registered office address for 18,857 entities and has for years been linked to tax avoidance strategies. During his first presidential campaign, U.S. President Barack Obama referred to Ugland House as "either the biggest building in the world or the biggest tax scam in the world." President Obama subsequently nominated Jack Lew to Treasury Secretary in 2013, despite objections that Mr. Lew had invested heavily in funds in Ugland House while he worked as an investment banker at Citigroup during the 2008 financial meltdown, with President Obama stating that he was not concerned about Mr. Lew's past financial transactions.
Investigation by the U.S. government
In 2008, the United States Government Accountability Office, an independent body of the U.S. Congress, investigated the nature of entities registered in the Cayman Islands and at Ugland House. The investigation involved reviews of documentation as well as interviews with officials from the Internal Revenue Service, Securities and Exchange Commission, the Department of the Treasury, the Department of Justice, the Overseas Private Investment Corporation, and the Export-Import Bank of the United States.
The GAO found that only 5% of the entities with a registered office address at Ugland House are wholly owned by U.S. persons. Also, the GAO validated the reasons why the Cayman Islands has become a popular jurisdiction for international finance and business, including the country’s reputation "as having a stable and internationally compliant legal and regulatory system." In an interview with the GAO, representatives from the U.S. Internal Revenue Service (IRS) cited "the Cayman Islands’ reputation for regulatory sophistication" and "legal protections for creditors and investors" as factors that might attract legal financial activity. Since the "legal protections" include secrecy, the report was forced to conclude that, "some U.S. persons have used Cayman Island entities, as they have entities in other jurisdictions, to evade income taxes or hide illegal activity."
In addition, the GAO report explained how U.S. government trade promotion agencies use the Cayman Islands and entities registered at Ugland House. The Export-Import Bank told the GAO that it has used the Cayman Islands to support the sale of aircraft manufactured in the United States. Between 2003 and the time of the GAO investigation, the Export-Import Bank had been involved in supporting 42 aircraft financing deals in the Cayman Islands. Also, officials from the Overseas Private Investment Corporation (OPIC), another U.S. government agency, told the GAO that "one-third to half of private-equity funds in which it has invested have been organized in the Cayman Islands." OPIC officials also said that "foreign investors in private-equity funds that they are involved with value the Cayman Islands' reputation for legal neutrality towards investors from different jurisdictions."
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- U.S. GAO Report to Senate Finance Committee. “Cayman Islands: Business and Tax Advantages Attract U.S. Persons and Enforcement Challenges Exist.”
- Leslie, Wayne (30 June 2012). "How Delaware Thrives as a Corporate Tax Haven". NY Times. Retrieved 19 January 2013.