No direct taxation

Public service cuts must happen says premier


The UK will not require the Cayman
Islands Government to implement direct taxation as a way of getting through the
current financial crisis.

Premier McKeeva Bush led a
delegation to London last week to discuss the findings of a three-person
independent commission that analysed the fiscal problems facing the Cayman
Islands Government.

The so-called Miller Report, which
was made public on Monday, made 12 recommendations on fiscal sustainability for
the Cayman Islands.  The first recommendation
was that the government not impose direct taxation, Mr. Bush said.

“It would be no surprise for you to
hear that we agree with this general conclusion and believe that ideally new
revenue measures will need to be kept at a minimum for the short to medium
term,” he said.  “However, we are committed
to examining ways to broadening the revenue base and we have given that
commitment to the UK.

“We received no indications during
the meetings that the [Foreign & Commonwealth Office] will be pushing for
direct taxes, although this is something that they would like for us to
continue to consider in our efforts to broaden the revenue base.”

Mr. Bush said the Foreign Office
agreed “on the vast majority of the recommendations” outlined by the Miller
Report, noting however, that the UK disagreed on the subject of direct

“But even on that subject, there
seems to be an understanding by the FCO that the Cayman Islands needs to
examine a broadening of the revenue base in a manner which makes this country’s
economy sustainable,” he said. “The UK did make the observation that they would
have liked to see more analysis in the Miller Report on the question of what
types of taxes may be suitable for the Cayman Islands.

“But in the end they very much accepted
that a key issue for the government in securing fiscal sustainability is to
reduce and control its expenditures and its borrowing levels.”

Although Mr. Bush said the
government remained committed to examining ways in which Cayman’s revenue base
could be broadened, he said any approach to do so “must be consistent with the
nature of the Cayman Islands economy to ensure that there is no negative impact
on our economic success”.

“Our position is, and will continue
to consistently be, that we do not believe that direct taxes are good for this
country,” he said. “Indeed we believe that it will change our way of life as we
know it, for the worse.”

Mr. Bush said the Foreign Office
also continued to suggest the Cayman Islands’ international reputation would be
improved if it were to introduce some form of direct tax because it would be
less likely to be viewed as a tax haven.

“The Cayman Islands reiterated the risks
associated with taking this course and after discussions, the Government agreed
to continue to examine ways to broaden the revenue base, but in ways that would
be suitable to the Cayman Islands [and] consistent with the country’s economic

Mr. Bush said he stuck to his
position on taxation during last week’s meetings and although the UK did not
necessarily agree with the position, they would not push the Cayman Islands
into direct taxation.

“So, this is a huge win for the
people of these Islands after being told we’d have to be [implementing direct

The Miller Report also recommended
significant reductions in government expenditure when it came to the Civil
Service, including pension benefits, healthcare costs, salaries, and in the
number of civil servants.

Mr. Bush said the government agreed
with all of the recommendations, some subject to legal considerations.

“There was substantial discussion
on expenditures relating to the Civil Service,” Mr. Bush said of his meetings
in London. “The UK made it clear that it strongly supported the observation in
the Miller Report regarding the significant growth in public expenditure as
compared to the growth of the economy.”

Mr. Bush said that in the Foreign
Office’s opinion, a more aggressive approach should be taken to the reduction
of expenditures. 

“They felt that the suggestion of a
four-per-cent reduction in civil servant salaries, which was being discussed
locally, was too low given the gravity of the situation and gave the example of
the 10 per cent cut in Civil Service salaries and a 50-per-cent reduction in
public sector expenditures in Turks and Caicos in support of their argument.”

In relation to recommendation by
the Miller Report that the numbers of civil servants be reduced over the next
five years, Mr. Bush said the government would support the governor in the
reduction “on the basis that this is done in a reasonable and compassionate manner”.

“However, we believe that this
should be achieved via the divestment of various authorities and government
agencies and by the recommended restructuring of Government departments,” he
said. “To be clear: My Government does not believe that the government should
be aggressively laying off civil servants in the current economic climate for
both economic and social reasons.”  

Explaining one way the number of
civil servants could be reduced, Mr. Bush said that if the government
privatized certain government functions, the civil servants could transfer over
to the private sector.

“The civil servants will still have
jobs,” he said. “When that piece of business goes, they go with it.”

Mr. Bush said there must be cuts in
Civil Service expenditure and he reiterated that the UK wasn’t “satisfied with
any four-per-cent” cut.

“That’s ridiculous in the current
situation,” he said.

“If you’re making $3,000 per month,
it’s better to receive [less] and take your cut rather than have no job,” he
said, adding that people needed to “bite the bullet” until the economy turned
around, at which time salaries could be revisited.

“Pain now, relief later,” he said.

Mr. Bush said Governor Duncan
Taylor said he was willing to meet directly with the Civil Service on the
subject of the reduction of expenditures generally.

“That will happen in the next
couple of weeks,” he said.

Although the public expenditure
cuts wouldn’t commence in March, Mr. Bush said they would be in place for
April, May and June, the final three months of the fiscal year.


Mr. Bush
Photo: File


  1. Civil servants with families on less than $4,500 may well bite the bullet but so will the economy – with reduction in salary comes reduction in spending and residents spending in supermarkets will be curbed and luxuries like ice cream, cinema, restaurants and clothes will be curbed or stopped. The question of legality over civil servants on contracts has still not been clearly addressed and breach of contract is still what is being proposed. If Cayman is able to introduce legislation that allows cuts to contracted staff without their consent then that will reverberate throughout the financial markets here – how can the government be trusted to honour its word? Cuts can and should be made to the civil service – there are too many examples of incompetent wastage on expenses and the payment of large salaries to civil servants no longer in post or demoted because of incompetency.

  2. This is a very “sticky” situation which I’m sure that no Political leader would ever want to be in. I’m not in Mr. Bush’s shoes but I can only guess how hard this must be to make these crucial decisions. SOme points to note and bearing in mind that I’m not a resident: –
    1. A leader sometimes has to do what he knows is right always aware of the consequences. These decisions are not met with approval by all but in the end it is worthwhile.

    2. As a humble suggestion: Mr. Bush can consider: rotational “no pay” leave for Civil servants. E.g. working a shorter week like 4 days

    3. Stop one of the Schools construction (e.g. Clifton Hunter) only until next year July-11

    4. Increase duty for the next year on non essential (luxury) items like alcohol, etc.)

  3. what do you mean r3 ‘in the end it is worthwhile’ – poppycock – leaders can and do make dreadful decisions that are not at all worthwhile – I cannot begin to list examples around the world – let’s start with Vietnam – no let’s not – how far back in time and how far up to the present would you like to go and in which nations?
    I’m sure the government should consider the schools – the designs are ridiculously complicated and ignored teacher many recommendations for alteration and change that would have been cost effective – but it makes far more sense to complete CHC than JGHS – those items you mention have just been increased and with less salary for civil servants to spend watch local businesses struggle. This government needs to get the super wealthy to do something – a property tax eg – and curb expenditure at CS like I said.

  4. Yes I agree that history has shown that leaders have made bad decisions in the past, but some have also done good as well. I think we can debate the effects of political decisions but we have to focus on the local issues: –
    It seems like the the Gov’t are looking for a short term, quick fix solution. Is such available and what would be the long term effect/s?
    Increasing Property tax may be and is a good idea but that works in the long term and may not be sufficient for a quick fix to solve their deficit.
    When the schools official start end of next month, it will put a further drain on the coffers of this Gov’t.

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