Leader of Government Business McKeeva Bush vowed Thursday that Cayman would not seek to implement either a property tax or an income tax to help pull the country out of its current financial bind.
‘We have decided…that to go this route would change the uniqueness of this Island’s economic base,’ Mr. Bush said. ‘Therefore we will not support those two suggestions.’
When questioned, the leader said the current administration would not assent to a value added tax, generally known as a sales tax, either.
Government officials are scheduled to bring a proposal to the United Kingdom’s Foreign and Commonwealth Office on Monday that will detail Cayman’s short, medium and long-term plans for financial viability. The foreign office’s approval is needed before the UK allows its overseas territory to borrow more money.
Cayman ended its last fiscal year on 30 June with an operating deficit of more than CI$80 million and is projected to have a $132 million gap by that time next year if no budget cuts are made and revenues continue to fall.
The country had not received approval to borrow the $30 million it says it needs to pay civil servants’ salaries, pension and healthcare costs as of Thursday. However, Mr. Bush said the next government payday doesn’t occur until the end of September.
‘We’re a long way from that,’ he said. ‘We’re going to make it, but it’s a most challenging time.’
Mr. Bush had earlier stated that Cayman ‘urgently needed’ the approval before the end of August to make payments for current operating expenses and capital projects.
Certain payments for capital projects, as well as employee pensions and healthcare costs, were not made last month because government didn’t have the money.
Mr. Bush said he would present plans on Monday to the UK foreign office that would both trim the budget and increase government revenues.
Government is expected to propose increasing fees ‘that haven’t been increased in years’ which could possibly include customs tariffs, company taxes and work permit fees, among others.
The majority of the rest of the ideas put forth by Mr. Bush on Thursday included plans to divest public assets, or enter into public-private partnerships with companies for the management of those assets.
For instance, Mr. Bush said there appeared to be some private interest in operating and expanding the sewerage system on Grand Cayman. That company could then take over the management of the system and receive revenue for it.
Other operations including the prison system, the management of roads and infrastructure and the airport were also mentioned as potential projects that might draw private interests.
Mr. Bush said talks were under way to sell the Government Office Accommodation Project to the civil service credit union. Mr. Bush said the deal would provide cash immediately for government and could eliminate the need to temporarily suspend government employees’ pensions to make up the deficit.
The long-term plan to the UK would also include detailed proposals for economic development projects such as a proposal to dredge the North Sound to allow larger pleasure craft to enter.
Mr. Bush acknowledged the environmental concerns that come along with that proposal.
‘But to sit back and say we can’t do it because you’re going to destroy the North South is not good enough,’ he said. ‘It’s not true in my view but let’s get some science behind it.’
The leader also talked of plans to develop Cayman Brac, possibly turning a current landing facility into a larger dock that could support cruise ships.
‘This government supports this project in principle,’ Mr. Bush said.
UK officials sent a letter to Mr. Bush last week informing him that Cayman would have to ‘convince’ them of a sustainable medium term plan for improving public finances before they would consider an extension of public borrowing.
‘It would be unwise, I suspect, to rely too heavily on a rapid improvement in trust fund income or to expect that the Cayman Islands prosperity can presume on an off-shore tax haven status,’ the letter from Parliamentary Under-Secretary of State Chris Bryant read.
Mr. Bush pointed out that the UK’s public debt at the end of 2008 measured as a percentage of its gross domestic product was about double Cayman’s current public sector debt.
‘Therefore it is not the case that the Cayman Islands has an unbearable debt burden,’ he said.