Hedge funds to be taxed, regulated

Gov’t budget plans small surplus

The Cayman Islands government will introduce a relatively small yearly fee for certain “master fund” hedge funds that are registered in the country in its upcoming budget, Premier McKeeva Bush announced in an address Friday night.
 
Mr. Bush promised this would be the only new revenue measure introduced in the upcoming spending plan.
 
The payment of the CI $1,500 per year fee will coincide with the first regulation of those funds by the Cayman Islands Monetary Authority. At present, Cayman Islands-registered hedge funds pay no fees and are not regulated by CIMA.
 
Mr. Bush told members of the Legislative Assembly finance industry representatives were confident that “such a fee could be introduced without any adverse affect” to the industry.
 
The Premier said it was expected the new fee would raise some $4.5 million over the course of the next budget year, that begins on 1 July and runs through 30 June, 2012. That money, he said, would be used as a rebate to Caribbean Utilities Company customers to offset electric bills.
 
‘This summer’s just beginning and from what I can see in electrical bills, it’s going to be a long, hot summer,” Mr. Bush said.
 
Although he gave a two-hour speech during his budget presentation which generally outlined government’s initiatives for the upcoming fiscal year, Mr. Bush did not present the actual budget documents and did not make them public in the Legislative Assembly as is customary during such speeches. Mr. Bush said this was because the Cayman Islands government was working up until 5pm Friday with UK officials trying to finalise budget plans.
 
Since the 2009/10 government fiscal year, the United Kingdom government has assumed more direct control over Cayman’s budget process because of debt levels and other financial missteps which have put Cayman in violation of several principles of responsible financial management contained in the country’s Public Management and Finance Law.
 
Mr. Bush clearly chafed at this arrangement with the UK.  
 
“It’s really, really tough for me to be directed by a desk clerk,” he said. “It goes against…things that I stand for. I don’t like to be pushed.”
 
Opposition Leader Alden McLaughlin had asked why LA members were present for the budget speech if no budget was there to be presented. Mr. Bush responded that he hoped the majority of the spending plan documents could be presented by Sunday to LA members.
 
Debate on the budget is set to resume on Wednesday at 2.30pm.
 
The numbers
 
Mr. Bush said the government was expected to end the current budget year on 30 June with a “small surplus” of approximately $4.5 million, if all cost-saving measures his government had proposed were followed.
 
When the current budget was first planned, it was thought government would end the year with nearly a $32 million operating deficit – which means government spending would have outpaced earnings for the year.
 
“This outstanding improvement is not an accident,” Mr. Bush said. “It reflects proper fiscal discipline from this government.”
 
For the upcoming year, the budget forecasts a spending plan of $535.8 million in revenues and $489.9 million in expenses. However, government also has to spend a whopping $33.8 million to pay off debts which would reduce the projected operating surplus in the 2011/12 budget to just more than $12 million.
 
Mr. Bush said government would also not undertake further external borrowings for the next two years. However, even with that undertaking and paying off debts at more than $30 million per year, government’s public sector debt is projected to be nearly $550 million by mid-2014.
 
“For me, that is still too slow a progress,” he said. However, he said it would be an improvement over the current public debt, which is more than $600 million.

Dart agreement

Mr. Bush also alluded to an agreement between the Dart group of companies and the Cayman Islands government that he said has been proposed.

The agreement includes:

*Reopening the now shuttered property that formerly hosted the Courtyard Marriott hotel.

*The construction of two or more new hotels on Grand Cayman. 

“The extension of the Esterley Tibbetts Highway into West Bay.

*Realignment of West Bay Road near the Courtyard Marriott with the associated extension of the public beach in the area including the creation of a public park.

*The creation of a solid waste management facility at a new location on Grand Cayman and closure and remediation of the existing landfill.  
 
Please read much more about this story in Monday and Tuesday’s editions of the Caymanian Compass…   
 

 

 

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6 COMMENTS

  1. So the MLAs will have to work hard – into the night even – on the Budget. No claims for overtime will be entertained. Any food provided should be limited to pizzas or similar, brought in, with bottled (East End?) water, no alcohol. Don’t let them out until they have sorted out the mess and produced a satisfactory Budget, understandable to us ordinary people.

  2. tough to be directed by a desk clerk says Mr Bush. This is a sign of what is clinically defined as megalomania. In any case, whose actions or lack of action caused the financial position Cayman finds itself in?
    What has Mr Bush got against humble desks or workers at same? didn’t he start at one? and what does now he work at? on his lap? on a bureau in 5 star hotels?
    Incidentally, is hypothecation of revenue (in this case, intending to direct revenue from a proposed new tax towards vote-catching expenditure to reduce electricity bills) permissible under the Finance laws? Is it not necessary for all expenditure to be put to the LA, and voted on?

  3. Old Hand

    This is McKeeva Bush’s political machiniations at its very best…

    Anyone who believes his crap about the UK Government(FCO Office)holding up Cayman’s budget should understand, that if it is true any at all, they are doing Cayman a favour by keeping him in check with the only laws and tools that are currently available.

    This man and his government is running amok with the establshed laws and procedures enshrined in both Cayman’s Constitutional and statutory law regarding the running and reporting of the country’s finances.

    What you should be worried greatly about is his proposal to suspend GAAP (generally accepted accounting principles)for government financial reporting.

    Cayman’s current dilemma in accurate government accounting is mainly the result of incompetency and lack of trained, professional accountants being in both management and staff positions within the government departments but…

    If this law passes, you are looking at the dark spectre of institutionalised corruption within the financial heirarchy of Caymanian government becoming a distinct threat.

    Be thankful for now, that the UK Government still has a reign on McKeeva Bush.

    Until you can vote him and his clique out of office in Cayman…

    Hopefully, forever