As a hedge fund guy, you stick your money on an island for tax reasons, but it's not always the nefarious reason everyone thinks.
It's the tax neutrality that matters. Once an investor takes money back to their own country, they are responsible for the taxes themselves. Rather than a system where for instance you might pay the country of residence and every investor from around the world needs to fill in forms to get their difference back.
Yes - I'm also in the asset management industry. The ultimate point is, investors in a fund don't want to end up in a worse tax position than if they'd made the investments in the fund directly and not via a fund. The worst of all worlds are paying tax at the fund level and not being able to offset that against local tax due - this is surprisingly more common than you might think; not to mention tax-exempt investors like some pension funds (sovereign wealth funds are a bit different again).
Some jurisdictions for fund tax residence/incorporation are much much better for this than others. If you then also look at jurisdictions which have a predictable and fair legal system and an efficient admin setup for funds you end up with quite a short list of places (Cayman, Luxembourg, Ireland, etc).
Isn’t this analogy wrong? The question implied is: if shoplifting were legal and if some people shoplifted to feed hungry babies, should we make shoplifting illegal?
If it weren't wrong, it would not be an analogy. Most intelligent people will realize that the current state of the law is irrelevant, but if you really can't get past that:
If shoplifting were undesirable and if some people shoplifted to feed hungry babies, is shoplifting then desirable?
Recently I saw that baby formula in our nearby store is now in the plastic box, with a tracker to make sure it's not stolen. Made me really sad. I asked the store employees, and apparently it's a common problem.
We have already established, that 'just following orders' is not valid, and
there does come a point where the law is so inhumane that you must disobey it.
I don't think the line is at 'Hitler is in charge', I think it comes much earlier. For example 'The law' in Britain has castrated Allan Turing for being gay after he won a Nobel prise and helped win the war. Would you follow those orders?
Right. Ironically, Great Britain, who financed the construction of the Nazi's military infrastructure, did in-fact draw the line at 'Hitler is in charge.'
Under capitalism, the line is drawn by the owning class. Unfortunately, working people don't get a say.
It's the tax neutrality that matters. Once an investor takes money back to their own country, they are responsible for the taxes themselves. Rather than a system where for instance you might pay the country of residence and every investor from around the world needs to fill in forms to get their difference back.