Cayman Islands

Prev    Next Caymans Islands revenue plan seeks to plug deficit hole Published on Tuesday, September 15, 2009 Email To Friend    Print Version By Alan Markoff GEORGE TOWN, Cayman Islands (Reuters) -- The Cayman Islands government will present a revenue plan to Britain this week to seek approval for the British overseas territory to borrow $372 million to help plug a widening government operating deficit. The Cayman Islands, a beach-lined Caribbean territory that is domicile to most of the world's hedge funds, faces ballooning debt caused by overspending on public infrastructure projects, and the global financial crisis that has sapped revenues. The territory of around 50,000 inhabitants is predominantly self-governing but needs the British government's permission if it increases borrowings above a certain threshold. The Cayman Islands government has already secured lenders for the $372 million it seeks to borrow. Leader of Government Business McKeeva Bush Cayman Islands' top elected official Leader of Government Business McKeeva Bush is to meet British officials in London on Thursday to convince them the plan to boost government revenues and cut spending is viable. "I am hopeful. I don't think the UK will disagree with our proposal," Bush said on Sunday. Last month, British authorities told the islands' leaders to come up with a realistic revenue plan, saying the territory should not rely on trust fund income or its traditional offshore tax haven image for its economic survival. But the Caymans' latest revenue plan will not include sales taxes, property taxes or across-the-board income taxes, as had been suggested by top officials of Britain's Foreign Office. Bush said the plan would, however, propose a 2 percent hike in import duties, and the increase or establishment of other fees, including a possible community service fee. Details of this fee were not finalized, though the idea would be to have a fixed fee for all Cayman Islands residents, based on their ability to pay. "Everyone working in Cayman is going to have to contribute," Bush said. Nearly all of the Caymans' consumer goods are imported, and the import duty collection system is already in place. To offset the impact of the increase in import duties, Bush said the territory's garbage collection fees would be eliminated. Unless actions are taken, the Cayman government's operating deficit is expected to reach nearly $155 million by the end of the territory's financial year on June 30th, 2010. Bush said the government also proposed imposing some new fees and raising others. This included creating a fee for registering trademarks and patents and increasing fees for passports, planning applications and nightclub licenses. In addition, as an immediate deficit-reducing step, the Caymans government said on Friday it was considering reducing by 2 percent for the rest of the financial year the salaries of most civil servants earning more than $3,571 per month. Although he didn't use the word "tax," Bush agreed the Caymans needed to expand its revenue base. "I believe the UK is being realistic ... We do not have a manufacturing base or natural resources. If we don't have a sustainable revenue base, we are putting ourselves in jeopardy," he said. Overseas territories such as the Cayman Islands have suffered from increasing pressure from G20 governments which have vowed to crack down on so-called "tax-havens." Cayman finance officials said income from hedge funds on the islands has dropped by up to 40 percent, bringing it to levels similar to those seen in 2005. This has led to many offshore locations reviewing their long-term business models. In a move that put pressure on offshore finance jurisdictions, Switzerland agreed last month to hand over details of some 4,450 UBS AG bank accounts to US tax investigators to head off a legal summons. Residents of the Cayman Islands have never paid income tax, sales tax or regular property taxes. Instead, the government has collected revenue through import duties, one-time taxes payable on property transfers and various fees, on work permits for foreign labor, company fees and professional fees.   Reads : 759   Prev    Next

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