A two-per cent increase in import duties is part of the proposal the Cayman Islands Government makes when it meets with UK officials in London Thursday about ways of creating a sustainable revenue base.
Leader of Government Business McKeeva Bush, who leads the Cayman delegation, said he spoke with UK economist Damien Reeves last week about the basics of the proposal.
‘I think he was satisfied with what we are telling them,’ Mr. Bush said.
The Cayman Islands Government has asked the UK for permission to borrow $372 million. The money would help cover its operating deficit over the current financial year and push forward capital infrastructure projects, including two new high schools and the new government office accommodation project.
That budget gap had been projected at $132 million, if no spending cuts were made and no new revenue measures were enacted.
Cayman’s meeting with the UK comes after Chris Bryant, the Parliamentary under secretary of state at the Foreign and Commonwealth Office, sent a letter to Mr. Bush on 27 August telling him he would have to be ‘absolutely convinced that there is a sustainable medium-term plan for turning round the public finances and paying off public debt before being able to consider any extension of borrowing’.
Mr. Bryant said he fears Cayman has no choice but to consider new taxes, such as payroll and property taxes.
Mr. Bush has said the government does not support the creation of income or property taxes, however he made it clear Sunday that he believes the Cayman Islands needs a more sustainable revenue base.
A two-per cent increase across the board on import duties would increase government revenues between $3.5 million and $3.75 million annually, based on the average amount of import duty collected over the past three years.
To help offset the increase in import duties, Mr. Bush said garbage collection fees would be eliminated.
In addition to the increase of import duties, Mr. Bush said the government proposes the creation of new government fees and increasing the amounts of existing fees that have not been raised for many years.
Some of the new fees include a fee for registering trademarks or patents here and fees likely to be increased include, among others, fees for passports, planning application fees and music and dancing licence fees.
A community service fee is also proposed. Although the details are not finalised, it will apparently be linked to employment.
‘Everyone working in Cayman is going to have to contribute,’ he said. ‘We will have to accept we have to be more accommodating as far as our immigration policies are concerned.’
Mr. Bush said the UK is being realistic in its demands and he agreed that Cayman needs a more sustainable revenue base.
‘They have stated facts,’ he said. ‘We spent more money than we were getting in. It’s as simple as that.’
Cayman’s proposal to the UK also includes methods of cutting expenditures.
Last Friday, the government announced it was considering cutting the salaries of civil servants earning more $3,000 – with the exception of teachers – by two per cent for the rest of the financial year ending 30 June, 2010, in exchange for four days of leave.
Chief Secretary Donovan Ebanks said that cost-cutting measure would save the government about $2.5 million.
Mr. Bush said he didn’t have the time to respond to allegations from the People’s Progressive Movement last week that he has handled Cayman’s financial crisis in the wrong way.
‘I have to concentrate on leading this country out of the quagmire we’re in,’ he said. ‘At this time, it doesn’t have to be a punch for a punch when it comes to politics.’