Leader of Government Business, Hon. McKeeva Bush, has revealed that direct taxes are not set to feature in the Cayman’s Islands’ financial recovery – although they have not been ruled out for the future.
At a United Democratic Party (UDP) meeting held on Tuesday night, Mr Bush insisted that the Cayman Islands would never be forced by the British into broadening its tax base and repeated his call to let the country to control its own financial destiny.
“We will not be pressurised into anything that would destroy the success we have worked so hard to achieve,” Mr Bush told the audience gathered in the Mary Miller Hall, Red Bay, “We have a way of life that we need to protect.”
Instead he laid down a series of measures intended to repair Cayman’s financial situation without the need for direct taxes.
They included tightening government expenditure and raising revenue by privatising the sewage system and increasing custom duties.
However, the prospect of taxes still looms after Mr Bush revealed that the UK government has granted the government permission to borrow some of the money needed to fix Cayman’s financial deficit on the condition the Cayman government carries out a study into the impact of direct taxes on the country.
Mr Bush said the instruction was contained in letter from Chris Bryant, the UK Minister responsible for the Overseas Territories, on Monday, 28 September.
The letter, described by Mr Bush as an “ultimatum”, rounded of a week of talks between the Foreign and Commonwealth Office (FCO) and the government, which were said to be “tense” but “professionally handled on both sides.”
For more than week, Mr Bush had been locked in discussions with Mr Bryant seeking approval to borrow $376 million.
In his letter, Mr Bryant said he would agree to $50 million immediately so that the government may pay off expenses such as overdrafts and would give approval for the country to borrow another $229 million.
However, the approval to borrow the additional funds will only be granted if Mr Bush’s administration agreed to certain conditions.
They included making “ambitious” cuts in expenditure over the course of the next two financial years and organising a committee to examine the effects the introduction of direct taxes such as payroll and property taxes would have on the country.
Mr Bryant said the Cayman Islands would also have to implement any “reasonable recommendations” made by the committee to ensure that Cayman built “robust foundations for the future of the territory.”
But Mr Bush has insisted that the country can repair its financial situation without the need for taxes to be introduced.
He revealed that the hunt for a private partner to invest in the sewage system has already started.
According to Mr Bush, letting a private firm take over and carry out improvements to the existing system, would raise an estimated $150 million and create more than 1,000 jobs directly and indirectly.
It would also provide capital investment to stimulate economic growth.
Mr Bush recognised that the government needs to engage in a major cost-cutting exercise and said that they were already restricting non-essential governmental travel and lowering rents.
The work permit process is also set to be streamlined for those persons employed in the financial services industry to kick-start the sector.
Mr Bush also pledged to make the Cayman Islands more attractive to investors in order to create more jobs and reduce unemployment among Caymanians.
Through his plans for recovery, Mr Bush said he was confident that the country could reverse the deficit and transform it into a positive balance by next June.
Mr Bush also insisted that failure was not an option for his government because he doesn’t want to give the FCO the upper hand.
“We will not allow the country to go ‘belly-up,’” said Mr Bush, “We must control our financial destiny.”