UK Approves Cayman Fiscal Sustainability Package

by Robert Lee, Tax-News.com, London

17 June 2010

The United Kingdom government on June 10 gave approval to the Cayman Islands’ fiscal sustainability plan without conditions, allowing for the island to increase its short-term borrowing; this despite fervent calls by the previous government for the introduction of direct taxation in the island.

In meetings between the newly-appointed Foreign and Commonwealth Office (FCO) Minister for the Overseas Territories, Henry Bellingham, and Cayman Premier, McKeeva Bush, the UK diplomat said that the FCO is content with proposals put forward to resolve the territory’s fast-increasing borrowing despite the absence of new tax revenue streams.

In a statement after the meeting, the Cayman Islands government said Bellingham had “welcomed the positive action taken to date and commended the Cayman Islands government on the measures proposed in their three year plan to restore public finances to a sustainable footing.”

Although the Cayman Islands haven’t comprehensively outlined its plan publicly, in past months, the islands have introduced higher annual fees for financial services companies and are planning to offer incentives to wealthy investors looking to become tax resident in the Cayman Islands. The remainder is expected to come from public sector retrenchment and increased inflows of financial services business to the islands, Bush has indicated.

In a statement following the meeting, Bellingham stated: “We had an excellent meeting today which we believe will be the start of a new and positive partnership between the UK and the Cayman Islands. We have agreed in principle that the Cayman Islands government can undertake additional borrowing next year. This agreement will help the Cayman Islands deliver its three year plan to deal with the impact of the global slowdown.”

Recommended