Cayman Islands Financial Services

Taxation in 2010 Budget has been only nominally increased by the Cayman Islands. This move reveals the Cayman government’s 3-year plan aimed to bring its budget back to surplus. Besides cuts in expenditure, the government of the jurisdiction has proposed many reforms designed to enhance the jurisdiction’s attractiveness to investors.

When delivering the budget, Cayman’s Premier McKeeva Bush said: “Given the observations of the current fiscal year, it is evident that the economy is at a point where additional taxation will compromise the competitiveness of businesses. Such an outcome would have implications for the economy’s capacity to grow its way out of the recession. There is an awful tendency here to say raise taxes and let business pay, but the harsh reality is that if that is the case, we will run away businesses, and lose more jobs. The only ones to really suffer are Caymanians, particularly those who can’t help themselves. Therefore one of the key tenets upon which government policy would revolve, during the fiscal year 2010/11, is the minimization of any new revenue measures on businesses, especially when it becomes a burden”.

According to the government’s budget forecasts, a small surplus of about USD 11.1 million is expected in the fiscal year 2011-2012. In 2012-2013, a fiscal recovery is foreseen as the surplus is expected to be essential.

To improve the attractiveness of the Cayman Islands to outside investors, the following measures are to be implemented by the government:

- to further modernize and enhance regulation and supervision in order to ensure that the jurisdiction keeps on par with the evolving international regulatory standards and best practices relevant to its various types of business;

- to intensify international cooperation and involvement in order to ensure that the government does its part to ensure the safety and sound regulation of the international financial system, allowing the islands to contribute to the development of international rules and standards that affect it;

- to increase the effectiveness and cost-efficiency with which regulatory agencies operate;

- to facilitate the efforts of government and the private sector to further develop the jurisdiction as an international financial centre;

- to become more business-friendly.

On October 2, 2009, Cayman Islands’ Financial Secretary, Kenneth Jefferson tabled an austerity budget that was designed to tackle the significant challenges that are being faced by the offshore jurisdiction as a result of the financial crisis. Unfortunately, the crisis has not left the government much choice; therefore a multitude of taxes and fees will be increased.

Rising expenditure and lackluster revenues are facing a 5.7% contraction this year. So, Cayman has been forced to reevaluate its tax system in order to provide an additional KYD 126.4 million (USD 156 million) over the next 12 months. KYD 94.9 million (USD 117.2 million) out of this sum will be realized in the fiscal year 2009/2010.

The Cayman Islands has rejected the UK’s call to introduce direct taxes. The jurisdiction has instead decided to introduce broad increases in levies on international trade and transactions and domestic levies on goods and services, consisting mostly of increases in import duties, bank, trust and company licence fees and work permit fees.