Tourism is a major part of the Cayman Island economy, but 30 percent of the island's revenue comes from the financial industry. Critics say places like the Caymans are costing the U.S. about $100 billion in tax revenue.
WEB EXTRA: Georgia Tax Haven
"These corporations set up entities abroad that are designed for the sole purpose of dodging their responsibilities here", said U.S. Rep. Lloyd Doggett of Texas. He is the co-sponsor of the Stop Tax Haven Abuse Act, currently in Congress.
A 2008 report by the U.S. General Accounting Office shows companies like Atlanta-based Coca-Cola, Bank of America, Wachovia, Ford and General Motors are among dozens of U.S. companies using off-shore tax havens in places like the Cayman Islands.
"All it takes is sending a $3,000 check to the Caymans and you never have to pay a penny of taxes," Rep. Doggett said.
A recent report by the Public Interest Research Group (PIRG) estimates tax havens are costing Georgia an estimated $2.5 billion each year. That's close to last year's budget deficit of $2.9 billion.
There's one address in particular in the Caymans that has Rep. Doggett and others crying foul. Ugland House is a five-story building that houses about 18,000 entities. The corporations have little to no physical presence there. They're registered through law firms inside, because there is huge financial incentive to do so.
It's a topic President Obama brought up during the campaign and while in office. He called Ugland House either the largest building in the world, or the largest tax scam in the world.
"I think it's a poor choice of words," Cayman Island businessman Tim Ridley said. He is a former lawyer inside Ugland House. "It's a little unfortunate that your president - who is an alumnus of the same law school as I am, would perhaps use sloppy wording."
Ridley said corporations at Ugland House are legally minimizing their taxes, and staying competitive internationally.
"If you structure your tax code to allow certain behavior to be perfectly legal, it is a little hard to criticize places like Cayman."
Critics in the U.S. say our tax code does need a complete overhaul. Pete Sepp with the National Taxpayers Union is one of them.
"If we want to bring businesses back into compliance, we have to have a system that is less burdensome, fairer, easier to understand and more transparent," Sepp said.
Our current system works for the Caymans. There are no sales, income or property taxes there.
"It's very easy politically to point the finger at a small island that works," said Jeremy Hurst with the Cayman Islands Real Estate Brokers Association. "I think this is a sustainable system and one perhaps the United States could learn from."
Rep. Doggett disagrees. "I feel like corporations that want to claim a slice of the American pie need to be helping to bake it."
The Stop Tax Havens Abuse Act currently is stalled in Congress.