Cayman Islands Could Consider Taxes

September 4, 2009 Offshore BankingTax HavensTaxation in Cayman IslandsTaxation in UK  No comments

Budget deficits in the Cayman Islands are forcing the nation’s government to consider the introduction of taxes.

The Cayman Islands, which are undergoing a severe governmental budget deficit, are being encouraged to introduce taxes to its system by the British Government. Facing a budget deficit of US$82, the island nation has sought out loans to meet its financial obligations, such as pension and government worker payments. As it is a British Overseas Territory, the Cayman Islands require British Government approval before increasing their borrowing beyond 80% of its annual revenue.

In a letter dated the 27th of August addressed to McKeeva Bush, leader of the Cayman government,Chris Bryant, British Foreign Office Minister, denied the Cayman Islands permission to expand their borrowing limit and pursue the estimated US$310 million in loans that they required. The Cayman Islands government already had offers for US$275 million of loans from three international banks.

The letter also said “I fear you will have no choice but to consider new taxes – perhaps payroll and property taxes such as those in the British Virgin Islands,” it continued to say “I understand, of course, that in so doing you will want to consider carefully the implications for Caymans’ economy, including the financial services industry.”

On the 2nd of September Governmental spokespeople for the Cayman Islands announced that they have been working on an official reply to the letter. In response to the denied loan increase and suggestion of introduction of direct taxes, McKeeve Bush said “We will either need to make aggressive cuts in either jobs or work hours for civil servants as well as raise indirect taxes, or we will need to focus on the areas where we can secure the revenues without harming our economy and our quality of life.”

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