Caymans Welcome Miller Recommendations

by Phillip Morton, Investors Offshore.com

Thursday, March 18, 2010

The Cayman Islands government has welcomed the general thrust of the conclusions of the Miller Report, particularly its main recommendation that the introduction of direct taxation in the jurisdiction should be avoided.

The Miller Commission was created by the Cayman government last year in response to the UK government's concerns that the global economic and financial crisis has damaged the territory's long-term economic and fiscal health, given its reliance on a healthy international financial services industry. In a statement, Cayman Premier, McKeeva Bush, said that the proposals have been broadly accepted as the way forward for the islands, and will be instrumental in drafting final proposals.

Commenting on the content of the Miller report, Bush noted:

“On the first recommendation, that there should be no introduction of direct taxation in the Cayman Islands, it would be no surprise for you to hear that we agree with this general conclusion and believe that ideally new revenue measures will need to be kept at a minimum for the short- to medium-term. However, we are committed to examining ways to broadening the revenue base and we have given that commitment to the UK. We received no indications during the meetings that the FCO (UK Foreign and Commonwealth Office) will be pushing for direct taxes, although this is something that they would like for us to continue to consider in our efforts to broaden the revenue base.”

Discussing the outcome of talks with the UK FCO, Bush said: “Generally, the FCO agreed with the Cayman Islands government on the vast majority of the recommendations.”

“There were of course a few exceptions, the most notable one being the question of whether the Cayman Islands should introduce direct taxes. But even on that subject, there seems to be an understanding by the FCO that the Cayman Islands needs to examine a broadening of the revenue base in a manner which makes this country's economy sustainable.”

“A key principle of my government is that while we remain committed to examining ways in which the revenue base could be further broadened, any approach to broadening the country's revenue base must be consistent with the nature of the Cayman Islands economy to ensure that there is no negative impact on our economic success.”

“Our position is and will continue to consistently be that we do not believe that direct taxes are good for this country. Indeed we believe that it will change our way of life as we know it, for the worse.”

Bush also said that the Cayman government agreed in principle with most of the report's other recommendations, including the privatization of government assets, restructuring government departments to cut costs, reducing civil service pensions, ensuring that civil servants contribute towards their healthcare costs, and the cutting of top government salaries. On the recommendation that the government reduce civil services numbers over the next five years, Bush said that the government supports the proposals, but only on the basis that numbers are reduced "in a reasonable and compassionate manner."