Cayman Finance backs ‘tax’ free budget

(CNS): Despite the fact that the industry will bear a significant part of the burdenof the government’s 2009/10 budget, Cayman Finance, the association representing the financial services sector has backed the government’s revenue raising measures as a preferable alternative to any kind of direct taxation.  However, the organisation was quick to note that the 2% fee to be placed on financial remittances is not a bank transfer tax but one aimed solely at money transfer firms.

“There has been some misunderstanding of the proposed 2% fee on remittances leaving the Cayman Islands via money remittance entities,” Cayman Finance, formerly the Cayman Islands Financial Services Association) said.

“This has incorrectly been reported as a fee on transfers occurring within the banking system. Cayman Finance wishes to clarify that this is not the case.  The fee relates only to remittances occurring through businesses that operate under a Money Services License and does not apply to any type of transfer occurring with any entity licensed as a bank within our banking system.  As a result there will be no impact on Cayman Finance members or their international clientele.”

The organisation said it was relieved that the government which it acknowledges was forced to raise revenue had chosen to maintain Cayman’s historic position and not introduce direct taxation of any kind on income or property.

Although the traditional methods of taxation such as license fees, import duties, registration fees, and work permit fees will impact the industry, Cayman Finance said it believes these steps will allow the country to manage this short term funding situation and emerge in a stronger fiscal position.

“The CIG has taken a fiscally responsible, yet economically aware, approach to this short term funding issue” says Cayman Finance chairman Anthony Travers.  “Mr. Bush and his team have managed to meet the UK’s demands for increased revenues without bowing to unreasonable and irresponsible pressure to implement direct taxation that would undoubtedly have crippled our financial services sector and done serious long term harm to the economy of our nation.  Cayman Finance members are appreciative of the CIG’s efforts in this regard.”

The new budget expects to raise an additional CI$94.9 million during the 2009/10 financial year which ends on 30 June 2010. Over a full 12 month period these new revenue measures are expected to bring in an additional CI$126.4 million which will be applied toward government expenses and debt reduction.

Cayman’s current total debt is equivalent to approximately 24% of its GDP.  According to the UK statistics office at the end of March 2009 general government debt in Great Britain was £796.9 billion, equivalent to 55.5 per cent of GDP. France’s public debt rose to 73.9 percent of GDP in the second quarter of 2009, and estimates for the US put their figure at close to 90% of GDP for 2009.