Caymans’ financial reforms in limbo as UK changes government
STEP JOURNAL- The Cayman Islands government has reassured its financial sector that it will not even consider introducing income tax or property tax, despite pressure from Britain.
The financial crisis of the past two years has sharply reduced the Cayman government’s revenues, as the hedge funds that populate the island have run into financial difficulties.
As a result the island went into deficit and has had to negotiate foreign loans, for which it needs the permission of the British government.
Further difficulties for the Caymans are likely to arise from the the US administration’s enactment of the HIRE Act, which could hamper Cayman Islands structures as well as US citizens residing in the Caymans. The European Union is also preparing new constraints on hedge fund activity.
In March, Cayman premier McKeeva Bush submitted a new three-year budget plan to Britain’s Foreign and Commonwealth Office for approval, but nothing has yet been agreed.
Now Britain has changed government, putting the negotiations on hold, Dax Basdeo of the Cayman Ministry of Finance told the Cayman Finance Summit meeting at the Ritz-Carlton Grand Cayman Resort last week.
Meanwhile Cayman’s finance sector is circulating an open letter to the island’s government, intended to marshal opposition to any suggestions of new direct taxes.
The letter warns direct taxation of the financial sector could send the Cayman administration’s finances into a “vicious downward spiral”. Instead it calls for cuts to government spending, starting with public sector salaries and benefits.
It has been signed by more than 100 organisations and business leaders, including Cayman Finance and its chairman Anthony Travers; offshore law firm Ogier; the Cayman Islands Bankers Association; Deloitte and KPMG.
In March this year, the independent Miller Commission set up to suggest a new economic model for the Cayman Islands came to much the same conclusions.
