Despite the United Kingdom’s steady insistence that the Cayman Islands adopt some form of direct taxation –
property or income tax – Governor Duncan Taylor said Thursday that he doesn’t
believe such measures are absolutely necessary to balance Cayman’s struggling
However, leaving out more
predictable streams of government revenue, such as direct taxes on property and
income, would likely lead to deeper public sector cuts in the near future, he
“There is already more tax than one
might imagine in the Cayman Islands,” Mr.
Taylor said. “It’s not exactly a high tax environment by any means but the idea
that it’s…a zero tax environment isn’t right either. Particularly work permits,
where you’re employing expatriates…you could look at that as a tax.”
“Not introducing any alternative
form of revenue raising does mean that the government is going to have to make
deeper and faster cuts in expenditure.”
A recently completed consultant’s
report recommended slashing the overall Cayman Islands
government personnel budget by some $80 million, stating that it appeared the
elected government had lost some measure of control over the country’s finances.
Premier McKeeva Bush submitted a
three-year budget plan to the UK Foreign and Commonwealth Office last week,
attempting to get London
to agree to let Cayman borrow more money in the coming fiscal year.
A response to that plan was
expected sometime on Friday, according to Governor Taylor.
The foreign office – particularly
Under Secretary of State Chris Bryant – has not decided whether it will allow
Cayman to borrow more money in the coming fiscal year.
Cayman is currently in violation of
at least three principles of responsible financial management as set out in
local law. The principles govern how much debt Cayman can assume and require it
to maintain a balanced budget. The overseas territory ended the last budget
year with an $81 million operational deficit and is projected to end this
fiscal year on 30 June with an operating gap as well.
Overseas Territories Director Colin
Roberts indicated in a letter last month that the foreign office would have to
be “satisfied that (Cayman) has a credible and deliverable plan to balance
public finances” before allowing further borrowing.
Mr. Bryant has not yet accepted the
three-year plan as “credible and deliverable” at this point.
Read more about this story on next
week’s versions of the Caymanian Compass…