Report rejects Direct Taxation in Cayman
An academic report that examined the fiscal challenges facing the Cayman Islands has rejected the recommendation made by the UK government. According to the recommendation, the Cayman Islands should introduce direct taxation in order to solve its financial difficulties.
The report was compiled by Richard Teather, a senior lecturer in taxation. Noting the effects of historically high taxation on the UK economy, the author of the report has urged the Cayman government to retain its low-tax approach and instead target public spending.
In accordance with the report, the introduction of direct taxation without ensuring public sector expenditure is balanced in relation to then jurisdiction’s population of around 50 000 people. The report notes that Cayman has solely relied on indirect taxation throughout its 200-year history.
The report was commissioned by Cayman Finance – formerly The Cayman Islands Financial Services Association (CIFSA).
The key points in the Teather Report are as follows:
- high taxes damage economies;
- the United Kingdom and United States benefited from lower taxes through the Thatcher/Reagan reforms of the 1980s;
- New Zealand and Ireland thrived under low taxes in the 1990s.
The Teather report rules out debt finance as an ongoing solution because, in the long term, this would be highly damaging to the jurisdiction’s reputation as a place to do business. It also highlights that government spending in Cayman is “totally out of line with its peers, having far higher levels of public spending than any other comparable jurisdiction.” According to statistics n the report show, the Cayman Islands has more than double the government spending per head of population than the average level for comparable countries.