CIG still needs new revenue

| 19/03/2010

Cayman Islands News, Grand Cayman headline news, FCO Colin Roberts(CNS): Colin Roberts, the FCO’s Director of the Overseas Territories (left), has told the Cayman Islands Government that the UK would still like to see it come up with new revenue raising measures in order to balance the budget. In a letter to Premier McKeeva Bush, written at the end of last week’s UK talks, Roberts says there is still a need to diversify the revenue base.  The senior UK civil servant states that the UK Minister (Chris Bryant) would be “surprised if new measures are not brought forward” as part of the proposed three year plan.

In his letter Roberts indicates that the UK believes the development of that strategic plan must include careful consideration of new revenue-raising measures in addition to a reduction in public spending, “both to stabilise the revenue base of the Cayman Islands Government and to present a more positive image as a financial centre,” he wrote.

The poor performance of revenues relative to forecast, he said, have reinforced the case to diversify the revenue base and improve forecasting performance for the years to come.  “It is disappointing that the Miller commission did not provide a robust, quantified assessment of such measures,” Roberts stated in the correspondence, referring to the independent report commissioned by the Cayman Islands Government to examine the country’s finances and present solutions to balance the budget.

He reminded the premier that the plan toeliminate the CIG deficit by 2013 should include credible and deliverable measures to restore balance, and while he acknowledges the “stark … assessment of public finances”,  with which the UK agrees, he urges the premier to take action, despite any resistance. Roberts warns the premier that asset sales and private finance initiatives need to be accompanied by a robust business case and financial appraisal to ensure that best value is secured.

“Such initiatives, if not carefully handled, risk becoming a long-term liability to the Cayman Islands, further increasing the gap between operating revenues and expenditure, and further reducing flexibility over expenditure in future years,” Roberts wrote.

The FCO representative said the UK would be happy to discuss borrowing requirements once they were satisfied there was a credible and deliverable plan to balance public finances within the next three years. Roberts also confirms the FCO will support the premier as he prepares and implements the measures necessary to start the recovery. A draft of the three year budget is to be submitted to the FCO by the end of March, the letter revealed.

“My economic team will visit Cayman in the week of 22 March to conduct the economic review and to help to with process,” Roberts added.

Meanwhile, a release from the governor’s office on Friday afternoon also sought to clarify the visit of the economics team, as mentioned by Roberts, to the Cayman Islands to review government finances and discuss the three-year plan. The UK experts will not be writing the plan but Roberts noted in his letter they would “help with the process”.

Andrew Paterson, the newly appointed Economic Advisor at the Foreign and Commonwealth Office (FCO), and Carole Pretorius from Oxford Policy Management, an independent consultancy, will arrive on Monday to undertake a review of the economic situation and public finances, the Governor’s Office said.

As in previous years, the aim of this visit is to meet key stakeholders in the Cayman Islands to deepen the FCO’s understanding of the challenges faced and to consider what is needed to promote financial and economic stability over the longer term, the office stated. “Paterson will be interested to examine the Cayman Islands Government’s performance in relation to the existing borrowing guidelines for OTs, compliance with the conditions attached to additional borrowing this financial year, and medium term plans for public finances,”  it was stated.

The office confirmed that the team will take the opportunity to discuss how things are shaping up with the draft three-year plan to deliver sustainable public finances, though the plan will be developed domestically, with neither Paterson nor Pretorius involved in its drafting.

Category: Headline News

Comments (40)

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  1. Anonymous says:

    Save us FCO.              .

    The Premier is too worried about the next election to make the hard and unpopular decisions that must be made now to save our country.

    As the Miller report has shown, revenue is not our problem, overspending is.

    I hope that while the FCO is on island they make the cuts to the civil service and the capital projects that need to be made since it is obvious that our own elected members are fearful of the political consequences.

  2. Anonymous says:

    Isn’t this the opposite of what Bush reported about the meeting wuth the UK? Didn’t he say that the UK was happy for us simply to make cuts rather than increase taxes?

    See CNS article on 15.3.10: "McKeeva Bush said at this morning’s press briefing that the FCO was allowing the CIG to work on a three-year budget plan that focuses on reducing public expenditure rather than new revenue sources"

    Can we believe anything Mr. Bush says?

    • Anonymous says:

      No you can’t!!

      Any other silly questions?

    • Anonymous says:

      NO it is NOT.

      In his statement during the press briefing the Premier said:

      The FCO also expressed its wish to see further efforts to broadening the Cayman Islands revenue base. The Cayman Islands remains committed to examining this issue providing that the country’s economic model is not adversely impacted.

      • Anonymous says:

        Sorry but there is a direct contradiction between Mr. Bush’s statement that the UK had agreed that the 3 year plan should not involve new taxes and the UK’s statement that the self same 3 year plan should. There is no way to spin this. 

        • Anonymous says:

          Go to http://www.gov.ky and read the Premier’s statement:

          In it he says:

          The three year plan to be submitted will serve as the basis for the FCO’s support of any borrowing needs, which are understood to be minimal. The FCO stressed that it would like to see a plan that utilised a mix of strategies and in particular that the following areas were covered:

           1. Expenditure reduction

          2. Broadening the revenue base

          3. Borrowing

          4. PFIs

          Note # 2

  3. Anonymous says:

    I agree with what the UK are saying – drastic measures are required and if the Govt would implement the necessary cuts re salaries and staff we would at least look as if we were taking this seriously . It would then stand us in good stead re the whole taxation issue and give us some leverage – just now we dont appear to be taking any constructive action which is why there is so much concern about what will happen , So stop messing about bite the bullet and make the cuts 

  4. for ALL Caymanians says:

    The vast majority of people know that a property tax is the way formard .It’s a shame that the leadership do not have sufficient backbone to stand up to the

    vested srlf-interest groups of Estate Agents, and being to afraid to upset certain business friends

    • Anonymous says:

      As someone who has no involvement with any estate agency or even any relatives in one, I find your comment to be utter nonsense. Given your lack of any evidence for your sweeping statement regarding property tax, next time you should feel equally justified in writing that you have it on good authority that the "vast majority of people know" that gravity will be repealed at the next session of the LA.   

    • anony says:

      Property tax you  dummy!

      If you’re the first to fall seriously ill and have no one to support you, you will be the first to have your house auctioned off for a few cents on the dollar because that’s what property tax means/ Obviously you have  no idea how just  how serious it is  to impose property taxes. You’re probably an x-pat on a work permit who will take off when things get too tough for you.

      I’m Caymanian and I am against property tax and the day that the UK or Big Mac mention property tax, the country better MARCH because it will be a gallows for the necks of the people. 

      People should be elected because they have the ability to run the country. Not create yokes to put around the necks of the citizens.

      We need educated leaders that are CAPABLE OF DRAFTING FINANCIAL PROJECTIONS THAT WILL RAISE REVENUE.

      If they can’t product this it simply means they are not edeucated enough and are not qualified to leadd.

      Taxes is a sorry cop out for laziness and illiteracy.

      Government is a business and should be run as a successful business with a University Graduate as the CEO or else, this is what you get. and I’m not pointing fingers at the UDP only but the PPM was also falling short in leadership that can generate revenue.

      Any candidate running for office should be required to produce and present at least two or three proposals with financial projections on how they will generate revenue for their districts and the country. We have made it too easy for these ignorant fools who are exploiting our pocket book  with high salaries laughing all the way to the bank while we stand in soup lines and social service lines. Its not fair. You need to know who you are electing to office, not any and every body that is your friend or your buddy or who can buy you a frig or some lumber can lead the country.

      • Live Free.... says:

        I understand the way you feel about taxes, but if the person you replied to is an expatriate, I’m pretty sure that individual knows what a property tax is, but you as a Caymanian don’t have a clue what it is or how it works, because you never paid any form of direct taxation before, and plus other countries in world have to, I think Cayman is the only place that don’t pay some form of taxation. But wait you all do, it is called in-direct tax, if you know what that mean? I guess not, because it does not reflect in your pay check or like the after mention property tax. The in-direct taxation has fail Cayman, it’s no longer can secure the revenue base like before, the Island has became rather overly expensive and the cost of living here is higher than any other Caribbean Country. And the other countries in the world had prosper for many years, yet the people in those countries pay taxes in all forms and even some of them become Million Years. Yes those other countries got hit very hard by the recession, but they have the funds to kind kick out of it, let’s say… property tax and income tax has help them, yes the people that paying all those taxes save their own country from going under.

        So now what does Cayman have to rely on from going further under and try to bring down the cost of living? The answer is paying some form of tax, I know you Caymanians don’t like to hear that, but that is the answer. However considering the cost of living being so high, I would not agree with an income tax, it’s kind of late for that, but property tax and motor vehicle emission tax is a go ahead. Property tax might not be as bad as you might think, it all depends on the value of your land and house calculated by what ever percentage that the Government or UK decides on putting into law or it might just be a set annual fee. Now vehicle emission is simple, that would more likely be attached to your vehicle license, this now depends on what size engine and year of the vehicle you have. Now I wouldn’t want an SUV, especially a Hummer with that in place. And definitely no 1980’s to 90’s cars, smaller engines and newer cars would benefit by a lower tax rate, a V6 might not be to bad but a 4 cylinder is the top choice, but please forget the V8 and high value cars, which would put you in a higher tax rate. Now how much it would cost? I don’t know what rates they will offer if put into law.

  5. Anonymous says:

    It is incredible, but unsurprising that the UK take on this is tax implementation.  The Miller Report lays out clearly the increased cost implications to setting up such a system, both in real terms and in terms of the projected losses of existing revenue due to even greater declines in our very mobile revenue streams (ie. financial services and tourism).   The report discusses the inherent difficulties and costs of setting up various kinds of tax structures and shows that establishing such systems will in fact require further initial borrowing.  At the end of the report (perhaps the FCO didn’t read all the way to the end?) it proves clearly that by following the spending reduction and asset sale plan starting from now, the CIG will be in a long term sustainable position by 2014. 

    The UK Government is the absolute last body that should be providing any kind of fiscal advice.  They also have an uncontrolled pension plan, and a worrisome debt burden.  If this economic team that is heading to Cayman is part of an annual caravan, why then are we in this current state?  Perhaps it was their sage leadership and advice that has led Cayman to the point.
    The borrowing route been attempted.  Avoiding the issue has definitely been attempted.  Increased fees have already been attempted.  Not only have none of these efforts been effective, but they have actually been destructive – we are seeing further decreases in tourism at a time when our competitors are starting to see comebacks and companies are announcing moves to other jurisdictions.  The unmeasurable is the business that would have come here but did not because of higher prices or damaged reputation. 
    It is time to steer on a different tack. 
    We have now been presented with a meaningful, articulate proposal backed by reasonable projections (based upon the best information possible) so why should we not take heed and give it a shot?  Miller & Shaw have made recommendations based on a statistical analysis, not on emotional hope.  The UK are hoping that by getting Cayman to implement taxation, it will get the OECD and the G-20 off of their back (I mean, how embarrassing would it before the UK if one of their BDOT’s were to succeed on a no direct taxation model!  It would certainly put them to shame as their corporate taxes gallop their way over the 50% mark.
    Give the Miller/Shaw recommendations a try.  Sound logic and crunched numbers back them up. 

     

  6. Anonymous says:

    McKeeva has delivered for the UK…..he has set the platform to introduce income and property tax and then blame it on the PPM and the UK.

    Thats why the UK wanted him back in power…….and actually engineered his return to power……..because they knew he wasn’t bright enough to understand anything beyond local politics and trying to destroy his opponents which by extension will destroy the country.

    The UK has "steered" him right into the uncoming headlights……and the unfortunate thing is that up to this point McKeeva still doesn’t get it.

    The passage of time will cause us all to reflect on what Mr. Chuckie was warning us about from 2005 with this man called McKeeva Bush !!!!

     

    • Anonymous says:

      LOL

      Yep the evil UK forced the PPM to build 3 new schools, the mother of all office buildings, all the new roads and take on 2,000 more civil servants all at the same time at the beginning of a global recession

      They then brainwashed the Caymanian voters to vote for Bush.

      They then let Bush get away from introducing taxes last year when Cayman was 2 days from not paying it’s CS and the FCO held all the cards, as just a ruse to let our guard down.

      OMG, your so right.

      and Chuckie is the next Messiah

       

      • Anonymous says:

        What in the world did UDP walk into? You would have sworn everything was going great when the PPM left, but I’ve never been more heartbroken to learn of the mismanagement and ignorance that has led our Island into this hot mess! Were they all in denial sitting on their high chairs and enjoying the status of Leaders? Leading us right into hell!

  7. Anonymous says:

    Mac, seriously,  can we not go back to paying garbage fees? Stick it on our utility bills and exempt the poorest 10% of homeowners (but let the charge accrue as a debt secured on their land register so that when the land transfers, bingo!). There is 5 million a year for free! It is fair and appropriate and by attaching to utility bills will cost nothing toenforce or collect!

  8. Joe Bananas says:

    Its pretty clear from the responses that anyone who will save cayman from itself will be blamedand hated for it.

    What happens to a dog that bites the hand that feeds it?   Watch!

  9. anonymous says:

    CAN YOU SAY DIRECT TAXES??!!

  10. Anonymous says:

    The Miller report only addressed  cuts in expenditures and the sale of assets with nothing about revenues, true to form this is written from the Rich man’s point of view.  Basic accounting 101 the fundamental accounting equation is still A=L+OE(R-E).  The Miller accounting equation = sell assets reduce expenses have no revenue = bankruptcy.  Thank God for the FCO as they still practice GAP and not Voodoo economics. 

    There are many ways to improve Revenues how about taking a few minutes to name just one mine is  increase the cost of vehicles license fee for vehicles costing $35k to $55k  license fee =$300, $60k and over $1,000.00.    Come on lets help the government to improve revenues make a suggestion.   Please assist our governemnt to improve our revenue, no need for casinos or taxes.

     

    • Anonymous says:

      How about we start enforcing collection of monies owed such as health bills, accommodation tax, garbage bills, etc.  I know many foreigners that have bought houses in the Cayman Islands and don’t pay garbage bills plus they rent their houses out to tourists so they are making money off us twice.

      • Anonymous says:

        how about we start collecting duty on the millions of dollars worth of goods thatcome through the airport from Miami? 

        • Anonymous says:

          How about we chill out and stop acting like the fatalists we’ve become. There is a RECESSION on people! Hunker in and support your Leaders – only they can help us now.

        • Anonymous says:

          "how about we start collecting duty on the millions of dollars worth of goods that come through the airport from Miami? "

          I have no problem with that but I think there is a lot of garbage fees unpaid.  Guess you either are renting to tourists illegally or don’t pay your garbage fees?  Belive me, I can crunch the numbers and it’s a lot.

          I don’t go shopping in Miami, I pay my garbage fees and I don’t have a house since hurricane destroyed it.

  11. Sole Provider says:

    Before any direct taxation is considered i would be much more receptive to the Cayman Islands Government;

    1. Charging me an annual licence fee for my pleasure boat say 10$ per foot per year. $200 for a 20 foot boat. $300 for a 30 foot boat etc.

    2. Introducing some kind of fee for emmissions testing on cars. This would help to keep our air cleaner by getting rid of all these vehicles that got so much smoke escaping from their tailpipe it looks like they are jerking chicken in their backseat. Locals and tourists will then be able to jog again without choking on the exhaust.

    3. Get rid of the travel tickets for contract workers and their families including luggage vouchers etc. . Recent budget figures indicate that these benefits account for over $1million in the annual budget.

    4. Revise the government policy on vehicles. Many government departments change their vehicles every 4 years. This is unnecessary. This policy can be revised to every 6 years.

    5. Note to CIG…no one really minds paying the 1$ per day garbage fees; just make it easier to pay by attaching it to our water authority bill. Monthly payments will be easier for the public to pay and better for govt cash flow.

    6. Paid parking in town. These wheel clamping companies are ruthless. provide me a place to park for a $1 per hour and i will gladly pay.

    7. Arden built the roads but left out one detail; Tolls. Yes, i will pay road tolls before i see income tax or land tax.

    8. Just as contracts were changed in the past from defined benefit to defined contribution, civil service contracts at least for new workers need to be changed so that there are contributions made to pension and health.

    9. Sell or lease all non-performing government assets.

    10. Have the government issue bonds to help shore up financing for performing assets such as sewerage and the new govt admin building.

    Once we implement these measures and continue to control spending there should be no need to introduce new revenue measures in the form of direct taxation.

     

     

  12. Economies of scale says:

    Economies of scale drive the regressive taxation that is known as a state-run lottery.  One thing Cayman certainly does not have is leverage on the economies of scale front.  Try crunching some numbers about how much money it would really take in.  And don’t bother comparing existing expenditure on foreign lotteries, the bigger jackpots will always drive the monies abroad.

  13. Twyla Vargas says:

    Will a National Lottery help?  every man and his brother wants it. Every Cat and dog buys it.   Why the MUM?  

    • Anonymous says:

      it would help a little…. a cayman lottery has not got the ability to make hugeamounts of money just due to the limited number of people.

      plus it will face opposition from the churches who conveniently have their own raffles(lotterys) and will not want the competition

      • Twyla Vargas says:

        But all my church brothers,  and sisters buy and sell lottery too, they cant be against it?

        Will someone be honest with me and tell me, is it worse to buy a lottery ticket for $3:00 dollars?,  or to open bars on  Saturday and sundays to sell liquor  and where you will find husbands and fathers burning 50:00 lunch money.  Why cant a issue  be raised by the church on this.   A spade  must be called   a spade.

      • FUZZY says:

        To Anonymous Sat.11:47 Why limit it to Cayman residents ,why open it up to anyone including cruise and stayover visitors.Remember some lotteries have a scratch off componentthat might appeal to visitors.

  14. Anonymous says:

    Did you notice that Mac had this letter since March 12, 2010?

    Isn’t anyone getting a little tired of this man hidding the truth from us.

     

     

    • Anonymous says:

      He probably had to run it past Tony Travers et al before he was allowed to make any statement / comment 

    • Anonymous says:

      Did you notice that Mac had to clean up this mess left by the PPM? How long did they hide this state of DISASTER from us Caymanians? How deeply they lied us into this mess! How do they expect us to believe that the UDP created this whole disdainful situation in a mere 9 months?

      Did you notice also that Mac is cleaning up after the PPM? Go crawl into your hole so we don’t have to listen to more ignorance.

      • Me says:

        To: Anonymous (not verified) on Sun, 03/21/2010 – 19:01

        Did you notice you’re not getting much support from anyone here? (currently 11 thumbs-down (plenty more to come I suspect) and 1 thumbs-up (you?)

        Perhaps you could kindly follow your own advice as per the final sentence of your comment.

        Thank you

  15. Roadblock says:

    Roberts warns the premier that asset sales and private finance initiatives need to be accompanied by a robust business case and financial appraisal to ensure that best value is secured.

    Now the FCO are also putting "roadblocks" in Big Mac’s way. How can he reward his supporters if the FCO insists on value for money during the privitization process?

  16. Anonymous says:

    can someone tell me why these people are vocal and in the news?

  17. Anonymous says:

    UK to the Rescue?

    That is the question.

    Sign Me,

    FCO (Fouling Cayman Over – in the eyes of the locals)

  18. Anonymous says:

    I just love these lectures from the representatives of a country-the "mother country" (puke) – whose own finances are in such a dire shambles that generations to come will be paying them off.

  19. Anonymous says:

    I think it is becoming pretty clear that, regardless of what the civil servants feel is reasonnable, the UK will run the show and implement the necessary cuts.

    It’s also pretty clear that, regardless of the findings in the Miller report, they intend on implementing new taxes so that the UK "looks good" on the international front regarding tax haven.

    • Anonymous says:

      Hellow have you heard the latest news in the International Business community. I guess not so let me enlighten youit’s the United States Tax Alert and was approved in the House of Representatives on March 4, 2010 while on the March 17, 2010 the US Senate voted 68-29 to approve the Hiring Incentives to Restore Employment (HIRE) Act.  Read these and see what is in store for the Financial Industry of the Cayman Islands and elsewhere.

      Maybe the UK is trying to save us from our impending doom the fate that awaits us if we continue to bury our heads in the sand like the proverbial Ostrich and hope that the problem will go way.  Or worst yet we continue to look at the world through rose coloured glasses while all around us is gray.

      We’ve already screwed up our Tourism product the high end tourists that we once catered to are long gone to other less over developed or properly planned destinations like Anguilla, BVI, St. Barts, Monacco, St. Tropez.  In the  60s, 70s, 80s and early 90s the Cayman Islands were know to be the vacation destination of the old money rich and the famous that wanted a quiet getaway where they did not not have to worry and could have easily blended in with the local population as no one cared about celebrity status or family fortunes. 

      It’s inevitable that direct taxation will come, the conventions that we have signed on to voluntarily or those that we were forced to be a part of as a result of being a BDTC will catch up to us sooner or later and there will be nothing that we can do about it so we might as well prepare ourselves. 

      Maybe the UK’s sole intent is to help us transition and prepare us for what is to come.  Caymanians we need to smarten up and do the necessary research, ask questions of our government, start reading again especially financial journals in two words "be informed", knowledge is power.  We should prepre ourselves for any hard roads ahead and willing and able to make the necessary adjustments to keep the good ship "Cayman" afloat.  Remember "WE" did it a bunch of 15 year old boys and some older men who sailed the world stayed in no one port probably longer than 6 months. These men had one intention and that was to make money and sent it home to build a better country and life for their family. Now my fellow Caymanians lets give the UK and our local representatives all the help we can to ensure that we keep this ship afloat.