PPM flips on new taxes

In an apparent reversal of an
earlier stated position, Cayman’s opposition party has come out against new
taxation measures as a way to balance the Islands’
budget over the next three years.

Following meetings last week with
representatives of the United
Kingdom’s Foreign and Commonwealth Office,
the People’s Progressive Movement issued a position paper supporting the
creation of a three-year plan to fix government finances.

“No more nonsense about getting
government finances straightened out within the year,” the position paper
stated.

The PPM affirmed its support for
the recently released Miller Commission report which recommended reducing the
size of the civil service. The party also urged Governor Duncan Taylor “play
his part as the person with constitutional responsibility for the civil
service”.

The PPM position paper noted that
the opposition party no longer backed any new taxation measures.

“We discern from the director of
the Overseas Territories Directorate’s letter of 12 March, 2010 that the UK is still
pushing for us to identify additional sources of revenue and, it appears, for
us to adopt some form of direct taxation,” the paper stated. “We do not agree
with additional taxation.”

Earlier in the month, Opposition
Leader Kurt Tibbetts sent a letter to Cayman Islands Premier McKeeva Bush which
stated both cuts in pay to civil servants and additional taxation would be
needed.

“(It) will inevitably involve real
sacrifices by everyone in the country – cuts in pay and benefits for civil
servants, additional taxation and so forth,” Mr. Tibbetts wrote, referring to
balancing the government’s budget. He declined to elaborate on what was meant
by “additional taxation”.

As they have previously, the PPM
again urged Premier Bush to roll back increased fees charged to businesses in
Cayman – particular those in the financial services industry – as a way to
stimulate economic growth.

“New company incorporations (as of
3rd quarter 2009 are) down by about 40 per cent on the figure for
the previous year,” the PPM position paper stated. “The total number of mutual
funds down by 4.4 per cent, the market capitalisation of listed mutual funds
down by nearly 40 per cent.”

The opposition party also pointed
out that work permits for the financial services industry had dropped about 14
per cent as of third quarter 2009 – stats that were now six months out of date
and that were likely to have declined further since then.

“Those are unsustainable figures,”
the PPM position statement read. “They must be turned around.”

“Tourism alone could not sustain
the (Cayman Islands) economy at the present
level, or anything like it, or provide Caymanians with the lifestyle and opportunities
that they now take for granted. Financial services have made the difference.”

The opposition also said it would
consider supporting certain government asset sales or privatisation initiatives
if proper feasibility studies were completed before those were done. This was a
recommendation made by the Foreign and Commonwealth Office.

However, the PPM indicated it was
not likely to support private financing initiatives that involved lease back
payments from government.

“Selling off assets that must then
be leased back cannot be an improvement unless the purchaser/landlord is a
philanthropist,” the party’s position statement read. “The rent must exceed the
cost of borrowing, so the deficit will be increased.”

“It would be the worst kind of
short-termism to say that the immediate bust brief cash-flow benefit matters
more than the fundamental deficit problem.”

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