Extracts from 2009-10 Policy Statement
Published 2nd October 2009, 1:28pm
The following is an excerpt focused on the financial services sector from a statement presented by the Premier Designate/Leader of Government Business, the Honourable McKeeva Bush, to the Legislative Assembly during the presentation of the 2009-10 budget.
…Last, but certainly not least, I turn to financial services.
Beyond a shadow of a doubt, the landscape of the financial services industry is changing – changing globally, changing radically, and changing for good. Much of this is due to factors beyond our control. What we do have some control over is the way we do business – and there can be no argument that the way we are currently doing business must change.
Together, the G20 and organisations such as the OECD and FATF have permanently changed the structure of the financial services industry. Our ability to grow as an offshore financial centre must now take account of new political, economic and regulatory dynamics.
The Tax Information Exchange Agreements are clear examples of the network of compliance that will no doubt be increasingly expected. We must now re-evaluate our vision for the future of our country, if we want to continue to remain a prosperous nation; or perhaps I should stress, if we desire to attain real prosperity, in terms of the entire quality of life, for all of us.
It is well known by now that this government took swift and decisive action to secure the immediate future of the Islands’ financial services industry, through successful completion of negotiations with several nations and signature of the required number of tax information exchange agreements. This ensured that Cayman was moved to the OECD ‘white list’ and re-asserted its positive international reputation.
Negotiations are ongoing towards agreement with several other countries – Mexico, Germany, France, Australia, Portugal, Canada and China. As a result of our active participation, our jurisdiction has now been appointed as a member of an OECD steering group which will assist in restructuring policy for the Global Forum [on Taxation]. We will continue to work with the OECD and the G-20 to ensure that Cayman maintains the level of compliance necessary to hold up its position as a reputable financial services centre.
Our regulatory infrastructure has been made progressively more robust; government and its statutory entities have worked diligently to strengthen this regulatory regime, with the support and hard work of some of the more far-sighted members of the private sector. Yet in spite of all our rigorous efforts as a nation, and all our successes, we are being pushed hard yet again, from several external sources.
There can be no argument now that we need to plan, that we must plot a sustainable economic course for our country. The decisions we make must be based on sound economic policies, and must also sufficiently differentiate us from our competitors.
It is often said: “Whenever the U.S. sneeze Cayman catches a cold.” Practically speaking, as the main market for tourism, the source of most of our imports and much of our inward investment, the fact that the U.S. is experiencing the worst economic turmoil since the Great Depression, had to have its effect on us – significant drop in tourism numbers, and in private construction; increases in unemployment as some businesses have downsized. This is not a model that we want for our country, our people, and our future generations.
So again I’m saying we must work towards the establishment of a sustainable path for the country. We must act now, and without delay now that in all our hearts and minds there is a common feeling, regarding the urgency of change.
We have consulted widely with the business community, the civil service, and the general public and they have affirmed that the urgency is realized. This has helped us come to some tough decisions; it is an encouraging start.
There has been particular consultation with the financial services industry, as we have resisted great pressures to introduce direct taxes. However, in the present situation, some new and enhanced revenue measures are unavoidable.
Historically, the government has created the legislative and regulatory framework which allows this industry to prosper, benefitting the community as a whole – from the early days of the Banks and Trust Companies Law and Regulation, to the current TIEAs.
In turn, this industry has a strong record of working with government and paying a share of the costs of keeping this system operating. This year is no exception. Accordingly, after much consultation, revenue measures are being implemented, several of which directly touch on that industry. These include increases in:
- company registration fees
- mutual fund license fees
- security investment business fees
- tax and trust undertaking fees
- work permit fees
- exempted limited partnerships fees
Similarly, an annual business premises fee will replace the current stamp duty on commercial leases. The new fee will cover all occupied commercial property, a more even-handed approach than just capturing the premises which are leased.
Clearly these are measures which address the immediate situation. Government’s revenue earning capacity must be planned for the long term. Resources are needed to liquidate long term debt obligations, and there must be investment in developmental needs of our country, such as building of tertiary and technical institutions of higher learning; appropriate funding for the weak and vulnerable; adequate reserve funding to seed new business ventures by qualified Caymanians, and to stimulate our economy in times like these; support for programming that will assist Caymanians to establish their own business in the financial services industry, and thereby, retain capital for the further development of our country.
It is my belief, that part of our strategic plan, ought to be the development of the Cayman Islands as a true international business centre, while preserving the necessary features of an offshore financial center. In this regard, I can categorically state that no path we undertake will be based on compromising our commitment to uphold generally accepted international standards of practice or regulation.
As an international business centre, we will be able to attract large financial institutions such as fund managers, wealth management companies, broker dealers to set up and operate from the Cayman Islands – much like they have done in Ireland, Singapore and other such centres; many of which also benefit from various aspects of OFC status.
Consultation with key stakeholders of the financial services industry, has provided support and confirmation that with minor changes to various parts of our laws and policies, and the introduction of strategic new laws, we can achieve this, and be well received in the global financial community.
- As part of our effort to create the necessary framework as quickly as possible, we will seek to achieve the following in the short to medium term:
- Establish a Cayman derivatives exchange.
- Review the capacity of our regulatory regimes to sustain significant growth in the financial and business services sector.
- Assess the job opportunities likely to be created, and prepare Caymanians for those jobs through local tertiary institutions, as well as access to other training needed.
A number of specific steps have been taken, or are planned, to promote and strengthen the sector:
- The Ministry has met with the new Financial Services Council, in keeping with our commitment to work closely with the private service providers – for instance, regarding how to respond to the EU Directive regulating Alternative Investment Fund Managers; and dealings with the OECD more generally.
- We plan to amend the Confidentiality Law as necessary to assist with promotion of Cayman as a leading international Business Services Centre.
- A working group has been formed to develop strategies, with a view to attracting fund managers to establish a physical presence in Cayman. This is in keeping with a broad based marketing and public relations programme, to promote and protect our reputation as a jurisdiction.
- Specifically, we will monitor and stage appropriate interventions with regard to any prospective legislation by any foreign government that might serve to threaten our industry.
- Approval has been given for the consolidation of all of government’s financial services agencies into a properly functioning Financial Services Secretariat, to support the Ministry.
- As one of its policy strategies, the new Ministry of Finance will work with the Ministry for Education, towards establishment of a training institute dedicated to financial services. This will align job skills with industry needs, and enhance opportunities for Caymanians.
The thinking and approaches I have explained and the programmes I have outlined will be supported by my colleagues when they speak. Altogether, I trust the public will hear ample evidence that this government is committed to proactively seeking solutions that will improve the lives of all the people of the Cayman Islands. That is the job you have put us here to do, and do it we will, to the best of our ability…
For more information, please contact the Financial Services Secretariat at (345) 945-5819 or via email at firstname.lastname@example.org.