Fixing Cayman’s financial problems

| 02/06/2010

Over a year ago I wrote that Government and the private sector should don their rain gear as the global financial crisis started to bite in Cayman. People said I was being a Cassandra. Nearly ten years ago, I wrote that Cayman’s revenue base was too narrow to sustain its development and the needs of a growing population, certainly not in a down economy.

I recommended a modest annual property tax specifically dedicated to building and maintaining the infrastructure. I also recommended that Cayman should develop a ten year plan for independence (a discussion for another day). People said I had truly lost it with these two suggestions. And now we are in the perfect storm, with the UK running interference and no real progress with long term solutions.

Earlier Governments wisely put in place mains water supply, sewage (but as yet only for part of the Islands), new airport and hospital and mandatory health insurance and pensions. But we then lived on borrowed time by deferring investment in roads, schools, port, runway extension and waste management. The previous Government decided to build the roads, schools and a new Government building simultaneously and without proper long term funding/financing for these projects. Also, over the past few boom years, Government operating expenditures troublingly grew as a percentage both of revenue and GDP. Paradoxically, the Ivan disaster produced a huge inflow of overseas insurance and reinsurance money and (even with the duty waivers and reductions) the Governments coffers filled with import duties on (re)building materials and replacement equipment and goods of all kinds. This inevitably tailed off. Then the global crisis hit and our two main economic drivers, tourism and financial services, stopped expanding and then slid backwards. Real estate, construction, support services and consumer spending all suffered. 2009 Government revenue suddenly sank well below projections, yet Government expenditure continued unabated.

Voters everywhere continually demand more and better services, all too often from their Government. And politicians promise to deliver them. So either we stop demanding or we (not just others) have to pay for these services. And there are indeed vital projects still to be undertaken here. The most pressing (and maybe the most expensive) is waste management and the current landfills in particular. Even the most optimistic realtor, developer and “no new taxes” lobbyist must be aware that the south end of Seven Mile Beach, Camana Bay and the bypass stretch are exposed to a potential toxic disaster (air pollution already and soil and water pollution that may be happening unseen underground). What price tourism, real estate and the North Sound if that occurs (and the crime wave and poor underresourced policing continue)?

There are some things we should stop doing. First, bashing the UK. This may play well locally for a time but is unproductive. Second, saying we just have a short term cash flow problem and all will be well if we can borrow some cheap dollars to keep us going until the boom times in tourism and the financial services industries restart. Those times may be a while coming(and we must ensure the right platforms to encourage these key industries), and the traditional revenue streams from these industries will likely be insufficient for the long term. Third, saying we just cut Government expenditure, eliminate waste and abuse in Government services, downsize the civil service and improve civil service performance. Steps must be taken (the civil service and statutory authorities are in the aggregate far too large a percentage of the total work force), certainly to freeze the expansion, but it will be very hard in reality to turn the clock back (just count the votes). Fourth, saying that privatization and public/private partnerships and private finance initiatives are the solution. There are some sensible options, but these are not sufficient to handle the problems. Fifth, saying that our ratios of debt and debt servicing costs to GDP are and will be well in line with other countries. This is misleading if most of that GDP is off limits as a source of Government revenue, i.e. we are not prepared to tax it directly! I suspect Moody’s may not have taken this into account in their recent rating confirmation of Cayman. Sixth, parroting “do not raise taxes in a recession”. This comes from the same people who during good times say “do not raise taxes, you will stop the boom”. Lastly, painting this as a Caymanian-non Caymanian issue. We are all in this together.

We should not ape the fiscally irresponsible behaviour of the US and the UK. Fortunately, we cannot “print money” and flood the market with CI$ debt that we cheapen by devaluing the currency (since Government borrowings are essentially in US$, we leave the Fed to do that for us!). We need to reinstate sound Government finances. I believe this is possible but contributions are required from the entire resident community and those invested locally. The self-interested “nail the other guy, he’s not at the table so he can be lunch” is very unhelpful. Suggestions should be constructive with a willingness to compromise for the greater long term good.

We now have deficit figures for the last fiscal year (disturbing even if predictable), an optimistic proposed budget for the current fiscal year and UK in-principle and conditional consent to a portion of the loans requested (as yet we do not know which financial institutions have made firm commitments to fund the loans). The UK still requires, not only satisfactory short term fixes, but also a long term plan for sustainable revenues/financing and expenditure cuts/containment to match (phased implementation should be possible). In our own interests, we should also set clear priorities.

The short to medium term solutions outlined so far in the proposed budget call for swingeing increases in the usual indirect fees and duties (e.g. import duties –effectively our sales tax, financial services and company fees, work permits, etc), a 2% levy on money transfers through licensed money services companies (but not through banks) and various other miscellaneous fees, a new annual business premises fee payable by the tenant of 10% per annum of the rent (with the concession that no such fee is payable on leases in force on which stamp duty has already been paid), one off savings (e.g. deferrals and perhaps cancellations of services and projects) and windfalls, civil service/statutory authority hiring and remuneration freezes, disposition/refinancing of Government assets/liabilities etc., and improved efficiencies, performance and collections (delivery is another question). But I fear that, given there is little hard evidence of sustained cuts on the expenditure side and of specific long term funding/financing of capital projects, there needs to be detailed study followed by action that broadens in the longer term the revenue base through meaningful new levies (implemented in a sensible staged manner) that are not so dependent on perpetual boom times and buoyant consumption. And this is not simply because the UK tellsus this. If we fail to do this, we are likely only kicking the can down the road for a short while.

Taxes should be fair, have the lowest adverse impact on economic activity and should be cost effective to collect and enforce. There are two new proposals in particular that do not meet the tests.

The proposed 2% levy on money transfers through money services licensees is unfair as it hits those at the bottom end of the economic scale (who have also been abandoned by the traditional banking system; perhaps the retail banks will be good community citizens and now rethink this poor attitude). It also sets a very ill advised precedent (thin edge of the wedge) as it will be seen as a tax on cross border fund transfers, an anathema to the global financial industry. Finally, it can only be short term, as in a few years, it will be uncollectible as electronic money transfers by cell phone will be possible (this is happening elsewhere already).

The proposed 10% business premises levy on rents (to be an obligation of the tenant but, it appears, to be collected by the landlord and remitted to the Government) fails to meet all the tests (the last one in particular) and is potentially open to nonpayment and fraud, in the same way as stamp duty, health insurance and pension contributions. And in the current climate, I fear that it may finally drive under many small businesses that are already struggling, if they have lease renewals coming up. Also, the new 10 % annual levy may adversely impact one of the key things Cayman needs to doto get the economy going again; that is to encourage greater economic activity here with new financial businesses establishing physical offices with people living and working here in and making real decisions. My concern is that this new in-your-face line item (combined with the ever increasing work permit fees) in the budget of a fund or investment manager considering a physical presence here might be a turn-off. To put this in perspective: currently a 5 year lease at an annual rent of US$250,000 carries upfront stamp duty of 5 %, i.e. a one off US$12,500 approximately; under the new regime, no stamp duty but an annual tax of 10%, i.e. an annual US$25,000, and thus US$125,000 over the five years.

I also question whether this new levy will result in tenants buying or building their own premises. Anecdotally, the response seems negative. The market is a lot more complex than that. First, many smaller tenants are in no financial position to buy or build. Second, in Cayman other than major retail banks (and most already have their own bricks and mortar), financial services and professional firms typically do not own their office premises as it limits their flexibility for growth (or downsizing) and ownership causes succession problems and more for partnerships. Third, major tenants are usually already tied into long term leases. Fourth, I wonder if the existing landlord/owner lobby has thought carefully enough about the implications in the unlikely event of their major tenants constructing their own buildings and vacating their current premises. A whole lot of empty buildings, so be careful what you wish for.

I must emphasise that new taxes should only be imposed if and to the extent that the various short-medium term measures outlined in the budget fall short or are not sustainable. Applying the three tests outlined above, I suggest for mature study and consideration three possible new revenue sources. First, a modest annual community service charge on real estate dedicated to appropriate infrastructure and services (like waste management) and collected by the Land Registry (there can be exemptions for those who genuinely cannot pay and for low value properties, perhaps variable rates/bands depending on the usage and value and a credit/reduction of the upfront stamp duty already paid or payable). Second, a levy on electricity, telephone (including prepaid cell phones), TV and water bills collected by the utility companies. Thirdly, and very reluctantly ifall else fails, casino licences (collected by a new Gaming Board). These could together raise a stable CI$45-CI$75 million annually for Government fairly, with low adverse economic impact, at a reasonable cost and with a high collection rate.

 

This article is an expanded version of the article that appears in the October issue of the Journal.

 

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Category: Viewpoint

Comments (27)

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  1. Anonymous says:

    Very good post. The challenge that I faced as a CFO in the CIG was that the fixed costs of government ate up most of the budget and left very little for actual program expenditure. Governments  must be prepared tostrike the correct balance between spending and revenue. You cannot continue to increase spending with out addressing the revenue issue  – it applies to both the private and public section. The Public Management and Finance law in Cayman is well written and can be effective  the people who administer it try to follow it.

    VAT is an effective form of taxation and it is a better mechanism that using property taxes and business licenses as revenue raising instruments. It would have been more effective to introduce a VAT than the recent increase in duties. However VAT comes with a high administrative costs both at central government and supplier levels so its introduction must be properly thought through.

  2. tim ridley says:

    I am all in favour of expanding businesses in Cayman and encouraging high quality businesses to (re) locate here. I also entirely agree (and have said so many times) that, to do this, we need an immigration regime that is simple, fair and efficient. What we have had for many years is far from that, notwithstanding many well-intentioned attempts to "fix" it once and for all.

    I spent nearly three decades with my colleagues at Maples and Calder together with many others in the financial services industry (both here and elsewhere) and Government encouraging, supporting and participating in the development and enhancement of Cayman as a world class financial services centre. Cayman’s very success has bred many imitators and increasingly subjected Cayman to the scrutiny of and attacks from critics and the envious elsewhere. But Cayman’s strength has traditionally been to be nimble, flexible and to take advantage of the opportunities presented by events around the world. That is as true today as it has ever been. Despite the challenges, we just have to keep at it constantly.

    I am no fan of big and expanding government, waste and unnecessary taxes. Equally, however, I (like Adam Smith) recognise that we must pay for the government, the infrastructure and services we reasonably need and expect. In suggesting the new and sustainable  (and what I consider to be reasonable) revenue sources, I am indeed thinking outside more boxes than many and trying to suggest workable compromises.

    To our friends in the doldums of the real estate market, I restate my suggested model. Suppose you were a potential buyer (say a sharp hedge fund guy from NYK wanting to spend a little of his bonus) of a US$3 million condominium on SMB. Currently the stamp duty is 7.5%, ie $225,000 approx. Suppose instead, the deal was stamp duty of say 5%, ie $150,000 (a saving of an immediate $75,000), and an annual CSC of 0.25%, ie $7,500 pa. Which do you reckon he is going to go for?  

     

    • Anonymous says:

      Tim, I want to thank you for your well thought out contributions on this forum and also for your hard work within the financial industry. I had the pleasure of working with you and know how much you care about these islands and the good things that you have done over the years, many times annonymously. It is a pity that you do not have a leadership role in the government where you could truly make a difference. That said, please continue to keep your finger on the pulse of what is happening and enlighten many with your written contributions. Bless you.

  3. Dagny says:

    It boils down to two simple points:

    To prosper we need more businesses here and more people here to run them, which will provide jobs and wealth and opportunity for Caymanians.  Welcoming immigration policy and efficient Government are the keys to this.

    Without that as an option, we can further tax the people who already live here making them poorer and poorer – because the taxation pulls money out of the economy and it inhibits new business generation.  The poorer people get the more they are going to want to get Government jobs, who already pay more than the equivalent in the private sector.

  4. Anonymous says:

    independence? sorry no thanks i don’t want Mac’s face on my passport!

    how about the VAT it is the tax that is fairest, property tax will burden a lot of the Caymanians who are already struggling and it is not fair on the people who actually invest a lot here.. VAT will strick across the board.. a lot of expats don’t even want to spend at the supermarket they kill our chickens and iguanas to survive, and they send they’re money back home so I think a VAT would be the best tax

    • Anonymous says:

      My friend, the problem with VAT, is what happens when you are unemployed and need to buy food from the grocery store?  It seems fair only to those who have a job! 

      I would rather a Payroll or a graded Property tax any day than a VAT tax.

      Or… better yet – no tax at all!

    • Sam says:

      We already have TAX

      All the hike duties and fees – what more do we need???

    • Anonymous says:

      Independence is not the route in our best interest, neither the opposite extreme of full British rule. But this I agree with Tim, we should be preparing ourselves in the event that we are left to stand on our own. I think that would a wise thing to do

  5. Dred says:

    Tax this tax that. Tax us into oblivion.

    Let’s see what we have hit so far:

    CIMA Fees gone up

    Business Licenses gone up

    Annual Government Licenses gone up

    Work Permits gone up

    Duties gone up

    Tell me are you about seeing Cayman go completely under?

    We have one of the highest cost of livings in the western hemisphere. We have people loosing jobs and what you throw out. TAX THEM BUGGERS!!!

    Well unlike you I would prefer us examine every other angle before we even breathe the word taxes unless its Taxis you are talking about.

    We need to get Medical Tourism going.

    We need Casinos creating Gambling Tourism.

    We need CIG getting leaner and meaner.

    We need CIG employees benefits addressed.

    We need people thinking about what else can be done to make Cayman more affordable. McKeeva’s thought process is that of a madman. How do you attract inward investment when before the words have cleared your lips you all but murder the private sector. Do you think businesses go out of their way to loose money? You spend money to makemoney not take money to make money.

    Cayman needs more creative thinkers than Tim. He can’t seem to get out of his Tax nightmare and wants to inflict it on us. I’m not saying I have the way forward but what I am saying is that Taxing will not take us there. It will only move to widen the gap between the haves and have nots. It will only lead to increased crime and increased social service issues.

    Again I say if Taxes were the solution our motherland would be finacially well off but they are worse than us. Now if you want to go say something stupid like they wasted their money I would say we need to now seriously get rid of the idea. No one government knows more about wastage than ours. We hold the patent and it’s never gonna expire. Doing taxes would be like giving a piss poor gambler more play money.

    Tim get over your taxes and let’s start talking about what our country has going for it that we are not exploring. Things such as the fact that we have beside us one of the deepest waters in the world and we could feasibly create electricity by Ocean Thermal Energy Conversion. How do we make money off of this i;m not 100% sure of but that’s just throwing an idea out there. I would like a plant of this nature over an oil refinery for sure. We also have sun 80% of the year. Is there a way to use this to our benefit as a country? Come on Tim let’s think outside the box for a change. Taxes are so yestercentury.

    • O'Really says:

       

      "We need CIG getting leaner and meaner.

      We need CIG employees benefits addressed."

      I don’t think Tim would disagree with you on these two points. However, it seems to me that where he ( and for what it’s worth I ) differ from you is in an assessment of how likely it is in the real world that the kind of changes required to correct the excesses in the CIG will be implemented. We have had a year of clear demonstration that there is no political will to tackle the CS. Unless the UK plays hardball, we face another 3 years of spineless behaviour from our politicians while Cayman’s financial position continues todeteriorate.

      Tim’s CSC is a suggestion made in the acknowledgment that, wrong as it is, Cayman and it’s politicians will not reduce spending significantly any time soon. I suspect that Tim like’s the CSC route because it is an effective way of achieving another unstated objective, that of bringing Caymanians into the tax net so they pay more towards the benefits they enjoy. Stating this bluntly is sure to raise ire, but it is time for Caymanians ( and that includes me ) to pay some of their way. 

      There are large sections of the Caymanian owned business community who contribute relatively little to the communal pot. Cayman’s merchant class know how to look after their own, but their own extends only as far as their families; it does not extend to their poorer Caymanian countrymen. This is a taboo topic, but it is a topic who’s time has come. Caymanians need to grow up a little, recognise that they must contribute towards the services they use and be prepared to put their hands in their own pockets and not just those of foreigners. The CSC would be an effective way to initiate this change.

       

       

       

  6. Joe Bananas says:

    All the intelligence, facts, ideas, and pre-proven models will do nothing in the face of Caymanian politics.  In their own vocabulary they are simply not "prepared" to do anything that would hinder their own selfish interest.  They will drive the good ship Cayman right onto the reef  just like the wreck of the ten sails and no one can stop them.  Sorry Tim.  I would voter for you but you are way to smart for the voters here.

    • Dred says:

      No wonder you are bananas.

      Tim would have us gone in 2 years. Finance would FLY off Cayman. Small Businesses would fold so fast it would not be funny. Real Estate will slow to a crawl.

      Tim is smart I do not disagree with that but his mind is single focussed and not open. He doesn’t even attempt to think out of the box. In other words he’s a box brain. He has all the potential in the world but refuses to explore it.

      At present I would dare to say he could be worse than McKeeva and you have no idea how hard that is to say from me.

      Anyone and I MEAN ANYONE who thinks TAXES are the end all for Cayman is out of touch with the changing world. Taxes don’t help countries it just ads to their problems.

      • go bananas says:

        Cayman has a lot of Taxes already that ANYONE who buys food, material,gas,water utilities, etc, already pays (or in some cases are supposed but don’t).

        In order to be "tax free" it is called fees,duties,permits,etc. anything but taxes. Why do you think that cost of living in Cayman is so high?  What ever its called here it is already too much for what little services it buys unless you are lucky (entitled) enough to be on the Governments welfare system.  Tim is/was a very successful business man. Mac was/is a very unsuccessful business man.  But he is Caymanian.  Keep dreaming the dream.

  7. Durrrr says:

    Tim, why should casino licences be granted ‘very reluctantly if all else fails’?

     

    I would genuinely be interested in your thinking behind this, as casinos are, as far as I can see, the only significant un-tapped source of revenue which would not cost the country a fortune to impliment/regulate.

    • Dred says:

      Tim does not take to any idea that sways him away from taxes.

      Our answers in Cayman starts with:

      Casinos – Gambling Tourism

      Hospital – Medical Tourism

      Lottery – Either directly ran or money made from proceeds. Licensing fees made from agents doing numbers.

      It then continues with a leaner meaner government.

      It does not include oil refining because as we can see from the Gulf fiasco we could kill the Cayman Islands with one small mistake. But I’m sure there are other ideas that can be looked at to create revenue for the Cayman Islands.

      These avenues should be explored first before we even think taxes.

      Tim can preach taxes all he wants but this will be the last pill we will swallow unless UK tells us to. I still think a case can be made for us exiting the deficit problem it will just take us time.

      • Anonymous says:

        Time that we do not have Dred.  Like it or not, Tim Ridley’s recommendations are probably the most sensible and attainable that have been presented.

        • Dred says:

          Tim’s ideas will sink the Cayman Islands. No thank you I love my country too much.

          The first step which would help us quickly is to trim CS down. That’s immediate cost savings.

          Then we look at other things we can do. Taxes will only create more problems. Maybe not for you because it’s obvious to me you have money to give away but I don’t and I’m not as unfortunate as others. Unlike you I respect those that do not have.

          CNS: How about submitting a Viewpoint, Dred?

          • Anonymous says:

            Yes a viewpoint would be nice, I doubt we will get one other than no taxes, no taxes, no taxes, no taxes for Caymanians.

            No one likes taxes, but we are in a mess. Unfortunately we have a lot of people who put their own self-interest first.

            Yes cutting the civil service is part of the solution but the problems are too big already. Times are changing and not for the better. We need people to realise this. Dred is a guy who just likes to stick his head in the sand, believing the good old days will come back when only the economy picks up again.

            But this more than a recession, it is a fundamental shift. Tim is right, Cayman needs to continuously innovate and it has not been doing that for a while. At the same time many aspects of its economy are under attack or have already disappeared .

            What is needed first is the realisation that Cayman is a ship with a big massive hole in it. Just hauling in the sails a bit, like Dred suggest may be popular, but it will not fix the problem and the longer we wait the faster we will sink.

            Of course people are worried, they think they don’t have the money for more taxes. The reality is however we are going to pay one way or another, whether through taxes, unemployment, fees or price increases.

            Dred’s we will just get by thinking will not sort it out. You can all applaud it and give yourself another five minutes of revelling in memories of the good old days but they are gone. The ship is broken and unfortunately we are not on a reef, we are at sea.

             

    • duaaaa says:

      Look at how the Government has run the countries finances the last 5 years.  The promise of a lottery means they will have to be held accountable for what goes in and out.    In a few short years they will somehow make the lottery lose money and all credability.

  8. tim ridley says:

    It is not actually entirely correct to say that "taxes" never go down…even in Cayman. A few (admittedly rather tongue in cheek) examples come to mind (and I am sure there are others):

    1. Stamp duty on real estate transactions has floated up and down over the years;

    2. The poll tax was abolished;

    3. The bicycle tax was abolished;

    4. The dog licence fee was abolished;

    5. The small boat tax was abolished;

    6. The initial registration fees for company incorporations was reduced substantially many years ago, in order to make Cayman more competitive with the BVI (it did not actually work for various reasons);

    7. Import duties were significantly reduced after Ivan;

    8. Various duty etc concessions and waivers have been granted by Governments over the years; the most recent being in the MOU with Dr Shetty.

    I share many of the real concerns expressed by others about the need to get unnecessary expenditures and waste under control and rolled back if possible. But we have to be realistic as to what can be achieved in the Cayman environment.

    As I have said before, unless the UK brings the hammer down hard, we are on the road to continued unrealistic budgets, no significant and meaningful expenditure cuts, no sensible new sustainable revenue sources and more borrowing with no idea how to repay the piper down the road.

    The "nieters" on both sides of the aisle are simply doing all the rest of us a big disservice right now.

  9. Dagny says:

    Although I realise this article is an old one, I would assume that Tim’s underlying philosophy has not changed and therefore comment is still valid.

    Your faulty thinking starts with the idea that Government will start being responsible about its expenditure once a tax (or call it what you wish) is implemented.

    You know that is not going to happen.  Trashmore will get bigger.  The airport will remain too small to bring in international flights.  Crime levels will continute to rise.

    It is only the downward pressure of limited spending capacity that could keep Government honest about truly ‘building and maintaining infrastructure’.   You well know that if taxes are implemented (and they are never going to stay ‘modest’ – we would not have the luxury of this debate if taxes are to go up) it means that Government can continue to hire too many people, pay them too much money and let them work in useless authorities and departments that offer no value to the Cayman society.

    Once a tax is charged, it is money out of, not into the economy.  I quote the IMF:  "tax increases result in a net efficiency loss to the whole economy".  Tax destroys wealth for everyone, including the poorest people.

    It is Government’s responsibility to create the best possible environment for entrepreneurship, creativity and personal advancement.  It’s mandate is to build the platform that will enable people to help themselves – not spoon-feed with protectionist bureaucracy that only nutures self-entitlement, which has long been the biggest cramp in the further development of the Cayman economy.

    The (only) point I do agree with you on is the fact that this is not a Caymanian versus Expat problem.  We are definitely all inthis together.  Unfortunately, the long standing protectionist ideals and legislation that has caused some to believe that there are two types of people (ie those who belong here and those who don’t) are still in place and the faulty thinking behind it is so deeply entrenched that it may take generations to overcome it.

     

  10. tim ridley says:

    I read the Miller-Shaw report more than once and well before it was released generally. It is like the curate’s egg-it has good and bad bits in it. The main problem with its key recommendations is that they are well nigh politically impossible to implement on the expenditure side without there also being significant changes on the revenue side to improve sustainability and fairness. That is the art of the possible and the art of the compromise. So far we have seen little of this at any level. And we are simply moving closer to the cliff.

    On the gambling point, I personally dislike lotteries and casinos. But I can see the arguments for high quality and well controlled casinos as part of the upmarket tourism product. Look at Monte Carlo for instance.

    On the community service charge (it should indeed be a fee for service!), I agree that its effective implementation requires a commitment to non-discriminatory enforcement. But the Swiss for example seem to manage successfully enough. So it is time we all understood that good infrastructure and good public services require everyone to contribute fairly. 

    On the utilities levy, I think it is fair if set at a reasonable percentage level. If you want to have a huge irrigation system in the garden, to run you a-c at 74F and chat on your cell phone all the time, you should indeed pay more than someone who does not.  

  11. Anonymous says:

    3 in a row tim…. and still banging the same drum…… and still afraid to use the term tax…sounds so much better when you use ‘community service charge’ or ‘levy’…zzzz.

    Tim- read the miller shaw report and base your next viewpoint on that!

    you touch on one good point  – gaming/casinos….this should be a no brainer for any government here but in a place where you can’t go to a grocery store on a sunday it seems light years away….

  12. Anonymous says:

    Tim

    In next election why don’t you run for leader of government business (the Premier), because it seems to me, you know more than McKeeva in terms of our finances and economy. 

    Mac appears to be undecisive and soft to his voters. 

  13. tim ridley says:

    Whoops, not sure why this old article has resurfaced on its own rather than as a link to more recent posts from me. It was written in the late summer/fall of 2009. So it is a little dated as some water has flowed under the bridge in the meantime. But what is correct is that Cayman is no nearer a sustainable solution to its long term budgetary issues now, than it was last year.

    It will be interesting to see if the UK lets Cayman off the hook once again this year by accepting the three year plan and approving the further borrowing, without insisting on both real and deliverable expenditure cuts and new sustainable revenues. Unless the UK (for whom I hold no brief whatsoever) holds firm, Cayman is simply postponing the day of reckoning for a few years, and it will be even more painful and expensive when it comes.

  14. Anonymous says:

    Tim, in general I think you are by far the soundest thinker we have on these issues and I applaud most of the points you make. However, I am afraid I must disagree with two:

    1. Casino licences. I note that you suggest only with reluctance but it should not even be on the list because of the social evils that always accompany casinos – crime (you think they are armed robberies now?), addiction,  bankruptcy etc. 

    2. We should not further tax basic utilities such as electricity and water as this will disproportionately affect poor people. You should note that we already tax these as they both have a fuel factor which includes the govt. duty on the fuel.   

     Re the community service charge, can you please clarify when you say "real estate" that you mean the land but not the buildings thereon. Have you considered whether collection of this tax will be politically feasible, i.e. that the only effective recourse those who will not/cannot afford to pay is to take control of their property and sell it to recover the tax many of whom mayl vote in the next election?