Archive for September, 2009
Dog poisonings under investigation says DoA Director
(CNS): The Department of Agriculture has said that it is working with the police to investigate the recent, apparent poisonings of dogs in the South Sound area. DoA Director Adrian Estwick said the department was taking the reports seriously and that any such deliberate act of animal cruelty is an offense under the Animals Law (2003 revision) but he confirmed that as yet the agent being used to poison the animals has not been identified. DoA Animal Welfare Officer Margaret Baldino advised dog owners to use a basket muzzle when walking dogs to prevent them picking up contaminated food.
Power generation expansion plans shelved
(CNS): CUC and the ERA have announced that the planned project to expand local electricity generation has been cancelled. Government had been soliciting for bids on the project. However, based on the current economic conditions the medium term future load growth projections have been revisedand the ERA believes the extra capacity won’t be needed. CUC said it is unlikely that there will be any need to warrant further expansion in the near term but both CUC and the ERA will be monitoring the country’s ongoing power needs.
Caribbean Utilities Company, which was one of two firms bidding on the capacity generating project as well as being Grand Cayman’s monopoly power provider, said it had been advised by the Cayman Islands Electricity Regulatory Authority (ERA) that the 32 MegaWatt expansion solicitation has stopped. Government was seeking 16 MW of additional capacity in 2012 and a further 16 MW in 2013 based on a Certificate of Need by CUC in March of 2009.
“While the current economic uncertainty makes precise forecasting difficult, CUC believes that, based on Grand Cayman large project starts and the general state of the Cayman Islands economy, growth during the period will not meet thresholds necessary to warrant capacity expansion in the near term,” CUC stated adding that it and the ERA would continue to monitor growth indicators and revise forecasts as necessary.
“The ERA has indicated it will commence a new solicitation at such time as large project starts and general economic recovery indicates a future need for additional capacity,” the power firm said in a release.
“CUC remains committed to providing a reliable electricity service to Grand Cayman and will continue to monitor key growth indicators and endeavour to secure additional capacity in a timely manner to meet customer demand,” CUC President and Chief Executive Officer, Richard Hew stated.
CUC provides electricity to Grand Cayman, Cayman Islands, under an Electricity Generation Licence expiring in 2029 and an exclusive Electricity Transmission and Distribution Licence expiring in 2028. Further information is available at www.cuccayman.com
MLA: Use reserves for budget
(CNS): The failure of the government to bring the budget to the House last week has placed the UDP administration in a difficult position, says North Side representative, Ezzard Miller. He told CNS that, as the temporary appropriation brought after the election runs out this weekend, government will have no operating expenses to work with. The House’s only independent MLA said that the government should stop trying to persuade the UK to approve further borrowing and use the cash in the reserve account to bring a deficit budget to the LA with, if necessary, dramatic cuts as well as fee increases.
He said government would then have time to generate revenue and take stock over the next twelve months. "I believe the government must call a session of the Legislative Assembly regardless of the negotiations going on with the UK,” Miller stated in the wake of the government’s second cancellation of the expected LA budget meeting. “Government can bring a deficit budget with severe cuts and use the reserve funds in the interim.”
Miller explained that the government needs to bring the budget immediately, otherwise it cannot function. He said that hardly anyone in Cayman supports direct taxation and its introduction would, contrary to the UK’s insistence, entirely undermine future economic success and therefore it is best to raise existing fees.
“We need time to raise revenue by increasing the traditional consumption fees, as well as time to examine the cuts that can, and must, be made in government operating expenses,” he added. “In the interim, this year’s operating costs must be dramatically reduced. There are many non-essential things we can cut from the budget, especially in the department of tourism. We can use the funds in the reserve account to tide government through until January, when government will collect a significant part of its revenue and we can use this year to scrutinize government spending.”
Whatever happens, Miller said, the government has to bring a budget and it is quite clear that the UK will not allow anymore borrowing without taxation. Given the circumstances, Miller said Cayman should manage without that borrowing and use the reserves instead, which requires the approval of the Legislative Assembly and not the UK.
Bush, however, told CNS this week that access to the reserves, which stands at $76.1 million, is not so easy and he did not want to finish the work of the PPM by truly bankrupting the country by using that cash. The financial secretary recently confirmed that the Cayman government does not need UK approval to access that money but he indicated it would require some legislative changes.
On Friday, in an article in the Guardian newspaper in the UK, Chris Bryant, the Overseas Territories Minister, once again spelt out the UK’s position as far as territories are concerned and made it clear that he would not approve more borrowing without the introduction of a sustainable tax base. He wrote that it was in the interests of all the overseas territories to have open, transparent fiscal arrangements and a sustainable revenue from a wide and diverse tax base. "Mere tax haven status will not pay the bills, nor will an over-reliance on indirect taxation.”
With an eye on what is expected to be revealed in Michael Foot’s forthcoming report, Bryant said that the overseas territories needed a strategy for reining in public expenditure and raising revenue to pay off debt. He said he expected that discussions with Cayman and other territories would continue and said he was determined that the territories’ public finances were resilient enough in the long term to handle economic shocks. He said fiscal policy may be down to the territories themselves but, he added, “The UK government is right to put restrictions on their ability to borrow unless and until they can come forward with a clear strategy for cutting that debt.”
During the course of this week rumour and speculation that Cayman would be introducing some form of direct taxation has caused enormous concern in the community, with the private sector entirely rejecting payroll, income, sales and property taxes. As the week drew to a close there was still no word on exactly what tax government would introduce as it remained in closed door negotiations with the UK, but it was perfectly apparent that the UK will not permit Bush to access the $372 million he has negotiated withoutthe introduction of a direct tax.
If you like this article, click here to find out how to support CNS
Guardian reports Cayman sinks deeper in crisis
(The Guardian): The Cayman Islands leader, William McKeeva Bush, was today forced to postpone his annual budget as the British overseas territory’s debt crisis worsens. The situation prompted financial leaders of the Caribbean territory to launch a blistering attack on the British Foreign & Commonwealth Office (FCO) minister, Chris Bryant (left), for demanding the tax haven introduces an employee tax to ward off disaster. This month, the Guardian revealed the Caribbean tax haven was forced to ask the Foreign Office permission to borrow £278m from banks to repair huge deficits.
Read Chris Bryant’s commentary British territoris are moving on tax
Kurt offers united front
(CNS): The Cayman Islands should stand firm against taxes Leader of the Opposition Kurt Tibbetts has told the leader of government business, in a letter sent to McKeeva Bush today. As negotiations with Cayman and the UK were still reportedly stalled, Tibbetts has written to offer the support of the People’s Progressive Movement against the UK’s insistence on the country introducing direct taxation. He says a united front would help the cause and recommended that representatives from the opposition be added to the Cayman Islands government delegation as discussions with the United Kingdom continue.
Although the PPM has been roundly condemned by the current administration for placing Cayman in the difficult position of seeking the FCO’s approval to borrow more cash, the opposition leader seems keen to stand by the new LoGB in the face of what he says is unfair behaviour on the part of the UK government.
“I believe there is real merit in the Opposition lending its voice to the arguments being made on Cayman’s behalf. A united front can but help the cause and I wish to recommend to you that representatives from the Opposition be added to the Government delegation as these discussions with the United Kingdom Government continue. At a minimum, I am of the view that the Government and Opposition should write in concert to the United Kingdom Government setting out what I believe to be the position on which we agree,” Tibbetts wrote to the LoGB.
The opposition leader says in his letter that Cayman ought not to fundamentally alter its system of revenue generation as the lack of most types of direct taxation is a critical factor in what makes the Cayman Islands an attractive place to do business.
“We, along with many who have an interest in the Cayman Islands, are growing increasingly concerned at what appears to be an impasse between the Cayman Islands Government and the United Kingdom Government as to the way forward to resolve our present difficulties with the budget,” Tibbetts wrote. “There are disturbing rumours that income tax is being considered as a means of providing a revenue base which is sustainable.”
Offering solidarity of the opposition with the position that the leader of government business had previously taken, which was not to introduce any direct taxes, Tibbetts writes that the PPM hopes that has not changed despite the pressure being brought to bear by the UK.
“Cayman must not introduce new measures involving direct taxation,” he stated, accusing the UK of exploiting the current difficulties balancing the budget which he considered unfair and unreasonable. Tibbetts reiterated his belief that Cayman’s experience is akin to all countries, including the United Kingdom and is temporary as a result of the unprecedented global financial crisis.
“The present global circumstances and their consequences are grave indeed, but they are temporary in nature and must be regarded and treated as such,” Tibbetts added. He said Cayman should not risk the fundamentals of the successful Cayman economy by introducing direct taxation. He said taxes were not helping other countries with major deficits that already have direct taxation.
Tibbetts did not offer any specific suggestions for new revenue raising measures, but said Cayman needed to restrict operational expenditure and borrow short term to bridge the gap between revenue and expenditure until the world economy rebounds and revenue streams return to normal.
Mafia used croc to terrorise
(BBC): Italian police say they have seized a crocodile they believe was used by a suspected mafia boss to terrorise people into paying protection money. The reptile was 1.7m (5.5ft) long and weighed 40kg (88lb). It was found during a weapons search at the man’s home in the southern town of Caserta. It was kept on the terrace and fed live rabbits in full view of neighbouring homes, police said. The mafia suspect was charged with illegal animal possession. The crocodile has been sent to a rehabilitation centre. Maurizio Vallone, head of Italy’s anti-mafia squad, said the animal had been held in a secure area of the terrace fitted with high-tech video surveillance.
Bar might rise for tax havens
(AccountancyAge): Offshore financial centres will face renewed pressure in their bid to achieve and retain “white list” status for tax compliance, after a meeting of global heads. Financial regulators gathered to debate the future standards for admission to the tax transparency compliance list, the scope of peer reviews for these countries, and the nature of fiscal sanctions to be applied to the non-compliant. New criteria for revised standards were set at a meeting at Los Cabos in Mexico on 1 and 2 September.
Fake snake report gets internet buzz
(CNS): A release supposedly coming from the Department of Environmental Health (DEH) regarding a dog-eating snake, currently circulating in an email, is a hoax. While the DEH says it will be issuing an official press release through GIS refuting the information in the fake report, the department is responding to emails sent to them about the snake stating that the information is false. “Due to inconsistencies in this email, it is clear that someone not associated with government had sent this email to create excitement and sensationalism,” DEH is saying.
The hoax release, which is headed by the Cayman Islands coat of arms and included the picture above, says (spelling errors included), “The Cayman Islands Environmental Health Department has issued a press release regarding a large Snake caught in Prospect Dr. George Town. Officials ask if anyone comes across a snake this large please call DOE immediately. No one should try to capture the Snake as it may swallow you whole!
“Officers responded to a call from a resident by the name Joe Hernandez, Joe said he found the snake Wrapped around his Three year old Pitt Bull, he tried to realease the dog but was unsuccessful. He watched as the dog was swallowed whole.”
Schools talks collapse
(CNS): UPDATED- 6:00pm: Following reports on CNS this morning that the general contractor Tom Jones International (TJI) had stopped work at the John Gray High School development project today (Friday 25 September) after talks with government turned sour, the education minister has denied owing the contractor money. In a statement issued Friday afternoon, Rolston Anglin said all payments due to TJI for the schools had been paid and the cessation of work by the contractor was premature.
A spokesperson for Tom Jones International said the firm would not comment on the statement at this time but CNS understands the dispute has resulted in severe job losses.
Despite earlier suggestions in the week that negotiations over the latest unpaid bill were amicable and heading for resolution, the two sides are now in full disagreement. Anglin said in his statement that to date, all payments due in respect of both contracts for John Gray and the Clifton Hunter schools are current and have been paid.
"Tom Jones International has now stopped work at the John Gray campus. However, the next payment for this project is not due until 10 October," Anglin said. "The cessation of work by the general contractor is therefore premature and in breach of contract. As such, any costs associated with work stopping will be Tom Jones International’s responsibility. There are clear contractual terms for the settlement of disputes, including mediation, which have not been followed by the general contractor. The cessation of work has circumvented these terms."
Anglin referred to reports regarding payment being withheld due to technicalities and said government believes that all payments must be diligently scrutinised and only made when appropriate. "This is not simply a technicality," he said. "He acknowledged the risk to jobs at the site and said their preservation had been an important consideration and one of the reasons why the government made every effort to assist the general contractor in continuing the projects.
"If the government has real reasons, why wait until the last minute?" asked Roffey, who is very upset by the situation and who as a sub-contractor is paid directly by TJI. "We ought not to be expected to have to be in the middle of this problem. The government has an independent surveyer and they say the money is due."
Roffey said he wished the whole situation had been more open and reasonable and he lamented the secrecy surrounding the dispute, especially as it impacts local sub-contractors.
Others have agreed and said that it seems government has shifted its position from “can’t pay” because of a lack of funds to “won’t pay” because of contract dispute.
The halting of the project will result in considerable job losses and financial losses to a number of sub-contractors and will create a number of technical probles even if it restarts . Roffey explained that once work stops it loses momentum and will take weeks to get back on track.
Although the minister stated that there were clear ways of settling disputes, including mediation, CNS was old by a sub-contractor that mediation had been sought but the two sides could not agree on where the mediators should come from. It is also reported that TJI has taken out a considerable bridging loan which was meant to keep the project going even though government had not met its payments on the basis that once government received the OK for its borrowing all the contractors would be paid.
Although work was continuing at the Frank Sound where the new Clifton Hunter School is being constructed, reports suggested yesterday that the next major payment date for that project is only seven days away.
Travers hits out at damaging UK “dithering”
(CNS): The continuing delay by the British government in signing off on the approval for the Cayman Islands government to borrow funds for this year’s budget is becoming the major cause of concern among leading business practitioners, says the chair of CIFSA. Speaking from London, Anthony Travers said that, while the UK was not necessarily turning the issue into a war, it was holding out for direct taxation, which Travers said was a seismic shift that was not justified. He accused the FCO of not understanding the far reaching consequences of their obstruction.
“The latest signs from the Foreign and Commonwealth Office are that they do not want to turn this short term budget issue into a war but they would like to see some measured cuts in public spending. That seems entirely reasonable,” the Cayman Islands Financial Services Association and Stock Market Chair stated. “Our information also indicates that the Minister for Overseas Territories, Chris Bryant, MP is not going to die in a ditch demanding we bring in income tax. However, all the signs are that they are still looking for a payroll tax and that is a cause for grave concern.”
Travers said he had canvassed senior business players in Cayman and they indicated that at the first sign of a payroll tax they will have to consider their options. “I believe this will inevitably lead to job losses and it will affect both the highly paid and more junior members of staff and lead not to a revenue increase but a decrease. The move from indirect to a direct system of taxation is a seismic shift which has not been thought through and which is not justified on the facts,” he added.
Travers also noted, with regard to the hedge fund sector, that Bryant and his colleagues at the FCO did not appreciate that in obstructing the CI government they are going to reap a bitter harvest with very far reaching consequences.
“The FCO’s sniping at hedge funds plays right into the hands of EU legislators who are desperately trying to curb the success of The City of London and in particular the hedge fund industry,” Travers claimed. “In short if the FCO attack the Caymans, they damage London. I would have thought in the current financial crisis that would be a horrendous example of unintended consequences. I urge the FCO to acknowledge that the CI Government has put forward sensible ideas to cut costs and raise revenue without the introduction of totally unnecessary taxes and allow the CI Government to borrow the relatively small amount of money it needs to carry out its business.”
It was revealed yesterday that Although CI government had been expecting a ‘yes’ from the UK on the borrowing requirement there was still no agreement by late evening which caused a public meeting to be cancelled. Leader of Government Business McKeeva Bush has also confirmed that the budget statement will now be postponed and will not take place on Monday but on Thursday evening instead.