(L-R) Governor Duncan Taylor and Premier McKeeva Bush
By Caribbean News Now contributor
GEORGE TOWN, Cayman Islands -- In a statement on Wednesday, the premier of the Cayman Islands, McKeeva Bush, outlined plans for what he referred to as a “Community Enhancement Fee” to be charged at 10 percent of the remuneration paid to foreign work permit holders in the Cayman Islands in respect of remuneration levels that exceed $20,000 (US$24,000) per year.
“Government had a choice. We could have introduced income tax, property tax, value added tax (VAT), or something softer such as the Community Enhancement Fee,” Bush said.
The government is also planning to introduce a fee to enhance the regulatory environment in respect of the funds industry in the Cayman Islands, along with requiring any newly recruited civil servants to contribute to both their pension and health-care costs, and existing civil servants to contribute to their health-care costs from their remuneration.
These proposals come amid ongoing discussion and delay in formulating a budget for the British Overseas Territory that is acceptable to the Foreign and Commonwealth Office (FCO) in London.
On Thursday, Governor Duncan Taylor confirmed that negotiations on the budget with the FCO are still ongoing.
“We do not yet have an agreed budget,” Taylor said.
According to Taylor, an economic advisor sent to the Cayman Islands by the Minister for the Overseas Territories, Henry Bellingham, to work with the Cayman Islands government on the budget has returned to London but remains fully engaged in the process.
“He has set out to the Cayman Islands government the broad framework for a sustainable and credible budget. He would need to see a draft budget which fits that framework before he could recommend to Minister Bellingham that he approve it,” Taylor said.
The governor said that the economic advisor has made clear that he would expect the Cayman Islands government to achieve this through a combination of expenditure savings and measures to raise revenue: the precise nature of these is largely a matter for the Cayman Islands Government but they must be credible and sustainable.
“At this time, the economic advisor is still awaiting detailed proposals on the budget from the Cayman Islands government," Taylor emphasised.
“We have made extremely deep cuts to get the budget to this stage. This still did not produce enough savings to satisfy the FCO. There have been calls to have significant layoffs (in the range of 500-700) in the civil service from the private sector. Neither the governor nor the deputy governor has come with any such plan, and government could not have accepted it anyway,” Bush said on Wednesday.
According to Bush, in June 2012, the government presented to the FCO for its prior approval, its intended 12-month Budget for the 2012-13 fiscal year before taking the Budget to the Legislative Assembly and Finance Committee. The FCO refused that budget request.
The FCO insisted that the territory’s government strengthen its fiscal position by implementing a greater level of expenditure reductions than had hitherto been made by ministers and senior civil servants.
“The concern is to make expenditures more sustainable going forward into future fiscal years. The FCO is also of the firm view that the strengthening and improving of fiscal results for the government must not occur solely as a result of reductions to expenditure, but revenues of the government need serious enhancement and expansion,” Bush explained.