The UK Parliamentary Under Secretary of State Chris Bryant, who apparently still has responsibility for the overseas territories despite media reports to the contrary, is still pushing for the Cayman Islands to institute direct taxation.
In a letter dated 8 October to Cayman’s Leader of Government Business McKeeva Bush, Mr. Bryant expressed concerns about the 2009/10 budget being ‘highly optimistic, on both the expenditure and revenue sides’.
‘Your budget plans leave little room for manoeuvre in the event of unforeseen contingencies, and your public finances may not be sustainable in the medium term,’ he said.
Mr. Bryant went on to state he looks forward to seeing real progress in the Cayman Government’s plan to cut public expenditure, but he expressed doubts about the proposed reductions in civil service expenses.
‘Your proposed review of the public service is welcome, but it is too early to say if this will yield any savings,’ he said.
Speaking about the revenue raising plans in the budget, Mr. Bryant said he would take a close interest in the independent report of new revenue options.
‘I look forward to seeing the [terms of reference for the report] before 31 October.’
This revenue review was a condition for the UK’s approval to allow Cayman to borrow up to $225 million in addition to $50 million of unconditionally approved borrowing.
Although Mr. Bryant stated he still had many concerns, including with the planned sale of assets and proposed dividend payments from statutory authorities, he said he was prepared to allow the further borrowing of $225 million if Mr. Bush was ‘genuinely confident that [the Cayman Islands Government] can deliver the budget presented’.
‘This permission would be on the clear understanding that, other than in very exceptional circumstances, I am unlikely to be prepared to agree [to] further borrowing this financial year,’ he said. ‘If it appears during the course of the year that your forecasts were over-optimistic, you will need to act swiftly to further cut expenditure and/or raise additional revenue to meet the emerging deficit.’
Mr. Bryant noted that none of the revenue measures proposed in the budget introduced any form of direct taxation.
‘I remain firmly of the view that this is a mistake,’ he said. ‘In the global economic and political environment, I believe this it will be increasingly difficult for Cayman to rely and indirect taxation for its economic future.
‘When the independent report on further revenue options is completed, I very much hope that you will determine to extend your revenue base on a more equitable base, with some form of progressive, direct taxation.’