The Cayman Islands government is considering proposals that would allow for more flexibility in foreign ownership of certain industries here to encourage outside investment, a top government official told small business owners Tuesday.
Finance Ministry Chief Officer Dax Basdeo cautioned members of the Cayman Islands Small Business Association – as well as members of the local press attending an association meeting at Mary Miller hall in George Town – that these were merely ideas being discussed as part of proposed revisions to the Trade and Business Licensing Law. Nothing was yet set in stone, Mr. Basdeo said.
Essentially, the proposal set out by Mr. Basdeo attempts to accomplish two things: first, to offer greater protection against competition for Caymanian-owned businesses in established industries, and second, to allow for greater foreign investment in industries which may have little to no presence in Cayman right now.
There would be two general types of business licences created under the proposed revisions to the law, Mr. Basdeo said.
One category, the “reserved” business, would be strictly for 100 per cent Caymanian-owned companies.
“We have things to consider such as artisans, handicraft businesses, small convenience stores, watersports businesses; these are things that are being considered that should be reserved for 100 per cent Caymanian ownership,” Mr. Basdeo said.
Under the other category, “restricted” businesses, some foreign ownership would be allowed. Exactly how much foreign ownership would depend on the type of business being conducted, Mr. Basdeo said.
“For instance, if we want to encourage more tech businesses, what we could have is a provision that says ‘if you’re a tech business, you can have 80 per cent foreign ownership’. That would help encourage more foreign investors to come into the country…and hire Caymanians as well.
“If we have more mature industries perhaps in terms of auto care, or beauty salons or taxi and tour buses…perhaps we could have more restrictive policies, maybe 90 per cent Caymanian ownership,” he said.
The Local Companies (Control) Law sets a general guideline that all locally operating businesses must have at least 60 per cent Caymanian ownership.
There are exceptions to that rule, for example, businesses regulated under the Information and Communications Technology Law do not have to abide by the so-called “60-40 rule”. Companies can also apply for specific exemptions under the law for various reasons.
“In some sense, that’s a more restrictive way of doing investment,” Mr. Basdeo said. “[The new proposal] creates a better policy tool for government; a way to control the flow of investment into the country and to ensure Caymanians can benefit.”
Small business breaks?
A separate plan being considered in the revisions to the Trade and Business Licensing Law would give small businesses in Cayman a bit of a break on licensing fees they must pay.
However, precisely what is defined as a “small business” is something of a stumbling block in the legislation.
Immigration Review Team Chairperson Sherri Bodden-Cowan said simply defining a small business as one with 10 or fewer employees would mean that many financial services firms operating in the Cayman Islands could qualify for breaks on their business licence fees.
Those companies are usually just subsidiaries of foreign-based operations and they provide a large chunk of government’s operating revenues through fees each year, Mrs. Bodden-Cowan said.
Mr. Basdeo said government did intend to offer “a lowered fee structure for small business” once that term was properly defined.
The proposal also seeks to more clearly define what types of business are carried on in the Cayman Islands, which could lead to a requirement that some companies be double licensed under the law.
Mr. Basdeo said that government didn’t have any additional fees associated with this suggestion, but was seeking to compile more accurate records of which companies were doing what activities.
“There’s a lot of confusion as to what categories small businesses fall under,” he said. “If you have a business that both sells goods and has a restaurant, it is actually two different businesses. One of the considerations is having a licence for every business type that you would have.”
A draft of the new Trade and Business Licensing Law has not been released.
The revised proposal has been under review by government for more than a year.