Bankrupt Cayman Islands to receive bailout!
LONDON, England - September 30, 2009 - After lengthy wrangling, the British overseas territory of Cayman Islands on Wednesday confirmed that it has finally secured permission from the UK to obtain a CI$50m (£38m) bail-out loan to plug a 35-40% collapse in revenue this year.
The island's government has also signalled that it is ready to cave into UK conditions on slashing government expenditures and an independent report on reform of its tax system that could see it start to impose direct levies to obtain further loans worth CI$229m.
Richard Parchment, an adviser to the government in George Town, said a letter would be sent to Britain with a formal agreement this week. Its severe shortage of cash meant it was days away from being unable to pay its civil service.
The Cayman Islands authorities claim that the UK has backtracked on stricter original proposals that insisted on direct taxes.
"There will be no community enhancement fee now, no income tax now, no property tax now, no death tax now," said William McKeeva Bush, leader of government business, in a live television address. But he added that this could change, suggesting the islands have already begun to consider new ways of raising tax revenue.
Although the loans are commercially funded, Britain would be likely to end up footing the bill in the event of a default by the jurisdiction. The Foreign Office is understood to be concerned that the Cayman Islands could trade on Britain's reputation to secure loans that it cannot afford - making its approval for the loan a tacit guarantee.
The Cayman Islands has so far resisted the idea of direct taxation of its residents and companies, arguing that this would jeopardize its livelihood as one of the world's biggest financial centers with the 12th richest GDP per head.
The island's government has also signalled that it is ready to cave into UK conditions on slashing government expenditures and an independent report on reform of its tax system that could see it start to impose direct levies to obtain further loans worth CI$229m.
Richard Parchment, an adviser to the government in George Town, said a letter would be sent to Britain with a formal agreement this week. Its severe shortage of cash meant it was days away from being unable to pay its civil service.
The Cayman Islands authorities claim that the UK has backtracked on stricter original proposals that insisted on direct taxes.
"There will be no community enhancement fee now, no income tax now, no property tax now, no death tax now," said William McKeeva Bush, leader of government business, in a live television address. But he added that this could change, suggesting the islands have already begun to consider new ways of raising tax revenue.
Although the loans are commercially funded, Britain would be likely to end up footing the bill in the event of a default by the jurisdiction. The Foreign Office is understood to be concerned that the Cayman Islands could trade on Britain's reputation to secure loans that it cannot afford - making its approval for the loan a tacit guarantee.
The Cayman Islands has so far resisted the idea of direct taxation of its residents and companies, arguing that this would jeopardize its livelihood as one of the world's biggest financial centers with the 12th richest GDP per head.
