Friday, June 28, 2013

Nicaragua’s new Cayman/Chinese mega-canal: the world’s biggest tax exemption?

From Martin Hearson, a blog about a proposed new canal to rival (and compete with) Panama's:
"The Reuters story on it notes that the $40bn cost would be four times Nicaragua’s national income"
And the Reuters story explains:
"Nicaragua's Congress last week granted Wang's Cayman Islands-registered HKND company a 50-year concession to develop the canal, following a September agreement with president Daniel Ortega. HKND in turn is a unit of HK Nicaragua Canal Development Investment Co., Ltd, a firm Wang had registered in Hong Kong just a month before the deal with Ortega."
Back to Hearson, who concludes after examining the draft project agreement:
"The government has agreed to an exemption from all taxes, including capital gains and value added tax, for the Chinese firm building the project (which happens to be registered in the Cayman Islands). The exemption extends to withholding taxes on dividends, interest payments and royalties, all import taxes, and any taxes on expatriate employees. The only source of tax revenue left out of the exemption is “existing labour taxes”. And all of this seems to be indefinite.

The Cayman Islands company will apparently pay just US$10m a year for the privilege of owning the waterway, although it should be noted that the ownership of the canal will gradually transfer to the government."
Let's see where this project goes.


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