The government has still not revealed the details of the three-year plan it sent to the UK Foreign and Commonwealth Office in March or what the UK’s response has been to these medium term financial proposals
for eliminating the current deficit. In a message delivered to the Cayman Finance Summit the premier told the industry that government had submitted a three-year economic plan to London, which had raised queries in specific areas. He did not confirm if the taxation question had been one of those queries but again promised not to introduce income or property tax.
Following further speculation about the government’s 2009/10 deficit and the immediate need to bring a budget to the Legislative Assembly for the start of the 2010/11 fiscal year on 1 July, the issue of taxation has once again been raised by the premier. Cayman may still be forced to introduce some form of taxation in order to get approval from the UK for further borrowing to plug the continuing government deficit as well as complete the major capital projects.
Cayman Finance members had asked McKeeva Bush to address them on this issue when he delivered the opening address at last Thursday’s summit at the Ritz-Carlton. However, the audience heard that the premier had been called off island on “urgent tourism business” and was not available to deliver his opening address. Instead Acting Chief Officer (Financial Services) at the Ministry of Finance, Dax Basdeo, delivered a message on behalf of the premier.
Basdeo said that as a result of the UK election Cayman’s own financial plans for the next budget had to be put on hold since a current minister can’t bind an incoming one and Cayman’s 2010-11 budget needs the approval of the new minister responsible for Overseas Territories.
“We amended the Public Management and Finance Law that required a budget before May 1st to allow us to bring the budget to the Legislative Assembly before the beginning of the new fiscal year,” Basdeo said on behalf of the premier. “We are taking the delay of the budget presentation to continue finding areas within the public service where we can reduce the 2010-11 budget as this is one of the key areas that needs to be addressed in order to finalise our budget. Cabinet has set a goal of reducing human resources related costs by eight percent and operational cost by ten percent.”
The message also stated that government was still seeking increased revenue by encouraging investment to generate revenue. The agreement with Dr Devi Shetty for the construction of the Cayman Narayana Health University was cited as an example along with the Memorandum of Understanding with DECCO for the construction of two cruise ship piers. He said these were long term projects that would increase government coffers in the future but in the short term government was still looking at more immediate sources of revenue.
“While the UK has been encouraging us to introduce some form of direct taxation, the premier has asked me to assure all of you that Cayman will not even consider income tax or property tax,” Basdeo said. “Whatever is decided, we are committed to doing a cost benefit analysis before any decisions on new revenue-earning systems are taken to help ensure fairness to all.”
During the address Basdeo also told the financial experts gathered for the summit that the government was working on a number of key international initiatives. He said government was tracking legislative developments on a number of fronts including the HIRE Act, which may have implications for Cayman Islands structures, and potentially for US citizens residing in the Cayman Islands as well as the discussions in Brussels regarding the Alternative Investment Fund Directive and the EUSD II.
The message contained details of some of the changes made to bolster policy, legislative and communications infrastructure within the Ministry of Finance. Basdeo added that the Financial Services Secretariat had been strengthened with an integrated team of policy, legislative and communications experts under the ministry’s direction. “In addition to day-to-day management of activities in the areas of policy, legislation and communications, this core team also provides support and coordination for the stellar public-private sector committees that have been reinvigorated or newly-established, including the Financial Services Council, the Financial Services Legislative Committee and the Tax Information Exchange Agreement negotiating team,” Basdeo said.
The ministry was also in continuous dialogue and working lock-step with the Cayman Islands Monetary Authority, Tax Information Authority, Portfolio of Legal Affairs and the Attorney General’s Chambers, with the common goal of ensuring the country’s international cooperation obligations are fully met.
With the various new resources, Basdeo said, government was looking to make significant progress by leveraging Cayman’s historic position as a financial services centre of excellence and becoming a locale for innovative, international business, competing with the likes of any other major cities in the world.
“We are seeking out more opportunities to be at the decision-making table to help inform policy with our unique perspective of being a small country that punches well above our weight in the global financial services market,” Basdeo stated on behalf of the premier. “We believe it is a place we have rightfully earned based on the sophistication of our legal and regulatory framework, our welcome participation in several third-party reviews and the credentials of our financial services sector in terms of talent, expertise and global reach.”
In the message the premier stated that Cayman should not let others speak for it in the fluid environment of global financial services and that Cayman Finance has set an excellent example to follow over the past year. “Government is committed to doing its part in this regard in the context of international relations and building a virtual diplomatic corps,” Basdeo added.