Mitt Romney: Cayman Islands Accounts Used By Foreign Investors To 'Not Be Subject To' U.S. Taxes

Mitt Romney: Cayman Islands Accounts Used By Foreign Investors To 'Not Be Subject To' U.S. Taxes

WASHINGTON -- Some tax experts are alarmed by Mitt Romney's apparent admission that Bain Capital set up offshore accounts in the Cayman Islands to help wealthy investors avoid paying U.S. taxes.

During an interview with the National Review's Robert Costa, Romney said that offshore sub-companies in the Cayman Islands help foreign investors avoid paying taxes on investments in the United States. Bain Capital currently has 138 such sub-companies headquartered in the Cayman Islands.

"The so-called offshore account in the Cayman Islands, for instance, is an account established by a U.S. firm to allow foreign investors to invest in U.S. enterprises and not be subject to taxes outside of their own jurisdiction," Romney said. "So in many instances, the investments in something of that nature are brought back into the United States. The world of finance is not as simple as some would have you believe. Sometimes a foreign entity is formed to allow foreign investors to invest in the United States, which may well be the case with the entities that Democrats are describing as foreign accounts."

By taxes "outside of their own jurisdiction," Romney is referring to taxes imposed by the U.S. government.

"He's basically admitting here that the Bain funds are set up in the Cayman Islands to help people avoid tax," said Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice, a nonprofit tax reform group. "If you want to cheat on your taxes, boy, they're making it really easy."
Since the Cayman Islands do not report information on their investors' accounts to other nations, however, such sub-companies don't merely help foreign investors avoid U.S. taxes, they help investors avoid paying taxes in other nations, as well. The ploy can even help American taxpayers invest in U.S. companies without accruing a tax bill with the IRS. By establishing personal offshore entities, Americans can pose as foreign investors and avoid paying U.S. taxes on investments in American firms.