Cayman Outlines Plan For Balanced Budget

by Phillip Morton, Investors Offshore.com

22 June 2010

The Cayman Islands has only nominally increased taxation in its 2010 Budget, which details the government’s three-year plan to bring the islands’ budget back to surplus. Alongside expenditure cuts, the government has proposed a number of reforms to enhance the islands’ attractiveness to investors.

Delivering the budget, Cayman’s Premier McKeeva Bush said:

“Given the observations of the current fiscal year, it is evident that the economy is at a point where additional taxation will compromise the competitiveness of businesses. Such an outcome would have implications for the economy’s capacity to grow its way out of the recession. There is an awful tendency here to say raise taxes and let business pay, but the harsh reality is that if that is the case, we will run away businesses, and lose more jobs. The only ones to really suffer are Caymanians, particularly those who can’t help themselves. Therefore one of the key tenets upon which government policy would revolve, during the fiscal year 2010/11, is the minimization of any new revenue measures on businesses, especially when it becomes a burden,” he added.

The government’s budget forecasts a small surplus of about CYD9m (USD11.1m) in the fiscal year 2011/12 followed by a ‘healthy’ fiscal recovery in 2012/13 when the surplus is expected to reach CYD60m.

“These forecasts are based on the existing fees and charges levied by the government along with the introduction of only one new revenue measure, in this budget, increased import duty on gasoline and diesel imports which is expected to generate some CYD10.3m in 2010/11. Effective July 1, 2010, import duty on gasoline and diesel will each increase by 25 cents per gallon and be applied to all such imports to Grand Cayman and Little Cayman,” Bush announced.

Outlining the government’s current ethos on extra taxation, Bush said: “The government is cognisant of the fact that, if a payroll or income tax were to be introduced on a labor force that comprises 50% transient workers, we would lose more business all around. All the more reason why there must be a reset of our economic base and business and investment; which will allow new revenue sources to emerge.”

The government therefore is to implement measures to improve the attractiveness of the islands to outside investors. According to the budget, this year the government plans to:

• Further modernize and enhance regulation and supervision to ensure that Cayman keeps on par with the evolving international regulatory standards and best practices that are relevant to its various types of business;
• Intensify international cooperation and involvement to ensure that the government does its part in ensuring the safety and sound regulation of the international financial system, allowing the Caymans to contribute to the development of international rules and standards that affect this jurisdiction;
• Increase the effectiveness and cost-efficiency with which our regulatory agencies operate;
• Facilitate the efforts of Government and the private sector to further develop the Cayman Islands as an International Financial Centre; and
• Be more business-friendly.

Finally, the government plans to open new offices in emerging markets. Concluding, Bush explained: “[Following] strong interest from high net worth individuals in markets such the UAE and China, and will seek to take full advantage of the opportunities this presents. High net worth individuals tend to be prolific in their investments ranging from real estate, property development to the financial markets, as such we will re-open our Hong Kong office on October 5 this year.”

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