Archive for June, 2010

Balanced Budget Plan outlined by Cayman Islands

Tuesday, June 22nd, 2010

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.

Cayman Fiscal Sustainability Package approved by UK

Thursday, June 17th, 2010

On June 10, the government of the United Kingdom gave approval to the fiscal sustainability plan of the Cayman Islands without conditions, allowing for the jurisdiction to increase its short-term borrowing. The approval was given despite the calls by the previous government for the introduction of direct taxation in the Cayman Islands.

When the newly-appointed Foreign and Commonwealth Office (FCO) Minister for the Overseas Territories, Henry Bellingham, met with Cayman Premier, McKeeva Bush, he said that the FCO is content with proposals introduced in order to resolve the Cayman’s fast-increasing borrowing despite the absence of new tax revenue streams.

After the meeting, the Cayman Islands government said in a statement that Bellingham had “welcomed the positive action taken to date and commended the Cayman Islands government on the measures proposed in their three year plan to restore public finances to a sustainable footing.”

Bellingham said in a statement that followed the meeting: “We had an excellent meeting today which we believe will be the start of a new and positive partnership between the UK and the Cayman Islands. We have agreed in principle that the Cayman Islands government can undertake additional borrowing next year.” He also suggested that the agreement will help the Cayman Islands deliver its 3-year plan in order to deal with the impact of the global slowdown.

CIMA reveals crisis effects on funds

Thursday, June 10th, 2010

The findings of an investigation into the effects of the global financial crisis on Cayman’s funds industry have been released by the Cayman Islands Monetary Authority (CIMA).

This report is based on statistics from more than 7 000 funds that were regulated in the Cayman Islands from 2008, which is when the crisis started.

Among the funds used for the statistics, most of the key indicators show notably weaker performance in 2008 than was reported in 2007. There was an 18% fall in subscriptions, a 42% increase in redemptions, an almost 3-fold dip in net income, and a 25% decrease in net assets.

According to the data revealed by the CIMA, some shifts could be attributed to the crisis. CIMA stated: “The proportion of funds with assets totalling USD 50 million or less rose to 52% in 2008, up from 43% in 2007. Although the largest proportion of assets continued to be allocated to master funds, the dollar value of assets allocated to that structure decreased by 24%. The instruments that saw the largest falls in asset allocation were: short bonds, which fell by 75%; long equities, which fell by 56%, and long bonds, which fell by 53%.” CIMA noted that “following on from trends seen in both 2007 and 2006, 2 investment strategies, Multi-Strategy (39%) and Long/Short Equity (22%), remained dominant in attracting the majority of assets, garnering USD 1 034 billion of the aggregate net assets.”

The funds industry was severely affected by the crisis, however, just 7% of funds suspended trading in 2008, which is up just marginally on that recorded in 2007 (5%), which the authority explained by the fund industry’s resilience in the jurisdiction.

Cindy Scotland, CIMA’s Managing Director, said that the authority goes on to publish statistical information on the funds industry with a view to improve transparency and extend global awareness of the structure and performance of the industry.

She said: “These are very valuable facts and figures. With the Cayman Islands estimated to have a major portion of the world’s hedge funds domiciled here, the information in the report provides a good gauge of what was happening in the global funds industry at the peak of the financial crisis.”

The performance of 7 325 funds, which is about 82% of regulated funds in Cayman, were aggregated in the report.

Cayman and Germany sign TIEA

Sunday, June 6th, 2010

The Cayman Islands entered into a Tax Information Exchange Agreement (TIEA) with Germany.

A signing ceremony was held on May 27, 2010. The Cayman Islands’ Premier, McKeeva Bush and Germany’s Ambassador to Jamaica, Jurgen Engel, signed the agreement.

The TIEA will allow for the exchange of tax information between the tax authorities of the Cayman Islands and Germany upon request, in case there is evidence of the perpetration of fiscal crime, or in civil tax matters.

Mr Bush said that the jurisdiction’s long-standing commercial ties with Germany make the signing an important step. He also welcomed the opportunity to host Ambassador Engel, a distinguished member of its foreign service. According to Bush, “Not only have Germany’s leading financial institutions held operations in the Cayman Islands for decades, but our 2 governments have worked closely together for many years, most recently as part of our mutual participation in the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes’ Steering and Peer Review Groups.“ Bush said that the Cayman Islands have had a bilateral agreement with Germany in effect since 2005 as part of the implementation of the EU Savings Directive, under which interest income earned by German citizens in Cayman Islands accounts is reported.

Cayman and Japan initial DTA

Tuesday, June 1st, 2010

The governments of the Cayman Islands and Japan have initialled a comprehensive double tax agreement (DTA) to allow for the exchange of tax information in civil and criminal tax matters.

According to a statement issued by the government of Japan, “The government of Japan welcomes this agreement which enables both tax authorities to carry out the effective exchange of information regarding tax matters in accordance with the international standard, and demonstrates the Cayman Islands’ commitments to combating international fiscal evasion and tax abuse, the importance of which has been reiterated in a series of international conferences”.

Prime Minister of the Cayman Islands, McKeeva Bush, welcomed the agreement and added that the jurisdiction is pleased to have reached this DTA, particularly given the exceptional commercial relationships between financial services sectors of both jurisdictions.

The double tax treaty still requires signing. It will come into force after both countries have undertaken their individual ratification processes.