The Cayman Islands are facing a fiscal challenge – the government has incurred a budget deficit in 2009 financial year of some $80 million, which it has financed so far by borrowing money through a $325 million bond issue.
The question before the Cayman Islands now is what to do about the deficit given that it is reasonable to suppose that until such time as the global economy recovers further deficits may be incurred in the current and future years. The options suggested are to raise taxes to meet expenditure, to cut expenditure to meet revenues, or continue to borrow more money.
However, at no time in their 200 year history have the Cayman Islands imposed any direct taxes, a fundamental fact which has helped them to build a highly valuable financial services industry.
This report examines the options to determine the best route to secure the future prosperity of the Cayman Islands and its people.