Press Briefing Statements
Hon. D. Kurt Tibbetts, JP
Cabinet Press Briefing, Thursday, 2 April 2009
Good morning ladies and gentlemen of the media here with us today, as well as those viewing or listening from home.
I wanted to provide an update on an important and historic event which took place yesterday, representing a significant milestone in our efforts to reaffirm our commitment to international cooperation, particularly in the area of tax information exchange.
As many of you know, Minister McLaughlin, in his capacity as Minister for International Financial Services policy, signed seven tax information exchange agreements with the Nordic countries at a ceremony held yesterday in Stockholm.
Minister McLaughlin was accompanied by Ms Deborah Drummond, Deputy Financial Secretary for Financial Services, who leads the Cayman Islands bilateral negotiations programme and was the team leader on negotiations with the Nordic countries.
The ceremony was held at a special location within the Ministry of Finance within the Swedish government. Minister McLaughlin, as the signatory for the Cayman Islands, was joined by counterparts from the various Nordic countries, including the Swedish Secretary of State, ambassadors to Sweden from Finland, Norway, Denmark and Iceland, as well representatives to Sweden from Greenland and the Faroe Islands.
In speaking with Minister McLaughlin yesterday following the event, he indicated that the Cayman Islands delegation was very warmly received and there was a great deal of positive support from the Nordic representatives regarding the tax information agreements, as well as the commercial agreements which are still being finalised and which will be signed in June of this year.
Minister McLaughlin also had the opportunity to meet with members of the Swedish business media during his brief visit to Stockholm to discuss the agreements, and to educate and build the international profile of the Cayman Islands in the broader context.
Yesterday's events in Sweden were preceeded by a series of significant announcements from the Cayman Islands Government, other countries with whom we've recently established tax information arrangements, and the OECD's Centre for Tax Policy and Administration.
On Monday, the Cayman Islands Government announced domestically and internationally the addition of Ireland, Japan, the Netherlands and South Africa to our schedule of countries under the amendments of the Tax Information Authority known as the unilateral mechanism.
Monday's announcement, when combined with our efforts over the past two weeks including the Nordic agreements, now means that the Cayman Islands has tax information arrangements with 20 countries, including the majority of Cayman's major trading partners. These arrangements cover four of the seven G-7 states and 17 of the 30 OECD member states.
In the following months, the Cayman Islands aims to enter into arrangements with a number of additional countries, including the remaining G-7 and five other OECD member states.
Also on Monday, the governments of Ireland and Germany issued separate statements to their domestic media welcoming their inclusion in the schedule of countries under unilateral mechanism and recognising the Cayman Islands commitment to transparency and upholding OECD standards for tax information exchange. These announcements received good coverage from the important media in Ireland and Germany and the Cayman Islands Government welcomes these endorsements.
Another international recognition of Cayman's bilateral negotiation programme and our unilateral mechanism came yesterday from the OECD, which duly noted our early commitment to international standards and commending our recent progress in this area.
All four announcements are being made available to members of the media, and will be posted on the Government Web site. Given the challenging global environment and the political positioning to date on offshore leading up to the G-20 Summit, the timing of these endorsements could not be better.
As I speak with you this morning, the G-20 meetings are still in session. Even as early as this morning, media reports and our own intelligence has not confirmed whether or not there will be a "blacklist" of uncooperative countries.
As we have seen, the focus of the debate continues to be fluid among the member countries on the issue of so called "tax havens." Regardless and in spite of this uncertainty, the Cayman Islands Government will be relentless in our efforts to demonstrate to the global community that our country, by any reasonable analysis, is cooperative, regulated and transparent in all aspects of our financial services sector.
I look forward to providing future updates as the situation continues to unfold.
Response to Editorial
I wish to provide clarification in response to The Editorial in the 30 March 2009 issue of the Caymanian Compass on the current state of the Government's finances.
When the 2008/9 Budget (the "Budget") was presented to the Legislative Assembly on 30 April 2008 it was projected that in the 2008/9 fiscal year the Government's Operating Revenues would be $528.21 million, its Operating Expenses $500.91 million and Financing Expenses of $13.44 million, resulting in a net Operating Surplus of $13.86 million.
As commonly happens with any financial forecast the actual results can vary somewhat from the original forecast based on changing operating conditions. When the Budget was finalized in April 2008 it was based on financial forecasts as at that time.
The 2008/9 Supplementary Budget presented in the Legislative Assembly on the 20 March 2009 contained updated Forecast Financial Statements-as of 18 March 2009-which captured the known and likely variances to the original Budget based on actual circumstances from July 2008 to February 2009 plus projections through to 30 June 2009.
The Supplementary Budget shows that at 30 June 2009 the Government is forecasting to have a Net Operating Deficit after Extraordinary Items of $28.96 million. This represents a deterioration of $42.82 million in the Government's Operating position when compared to the original Budget.
The major contributors to this forecast deficit are:
- $21.16 million reduction in Operating Revenues;
- $15.19 million in Extraordinary Expenses;
- $4.0 million increase in the cost of Tertiary Care at Various Overseas Institutions; and
- $2.1 million increase in financing expenses.
The forecast reductions in Operating Revenues are the direct result of turmoil in the global economy and its impacts here in the Cayman Islands. The United States of America is the major source of business for this country and as a result any downturn in that economy will have a negative impact on the Cayman Islands. No one knows with any certainty what the magnitude or severity of those negative impacts will be on the Cayman Islands. The Budget was prepared on the best available information at that time.
Some of the revenue classifications that are forecasted to decline and which contribute to the forecast revenue decline of $21.16 million are as follows:
Extraordinary Expenses incurred by the Government in the 2008/9 financial year are forecast to be $15.19 million; these items include the Government's response to Hurricane Paloma, Special Police Investigations and the Judicial Tribunal. These items are beyond the normal scope of the Government's normal recurring activities and could not have been reasonably forecasted at the time the Budget was prepared in April 2008, therefore they have been classified as Extraordinary Expenditure. The Portfolio of Finance and Economics has advised that this is the correct treatment for expenditure of this nature.
The Government is forecast to have a cash balance of $126.01 million at 30 June 2009 despite the 2008/9 forecast Operating Deficit. This is some $7.47 million more than anticipated in the original 2008/9 Budget. The circumstances which contributed to the operating deficit, particularly the much talked about global economic crisis will require continued close monitoring and careful policy decisions to minimize the negative impacts here in the Cayman Islands.
The revised 2008/9 Financial Forecasts indicate that the Government will be in compliance with all but one of the Principles of Responsible Financial Management specified in the Public Management and Finance Law. The one area of non-compliance is the principle which requires the Government to have an operating surplus.
For the reasons already outlined the Government is unable to be compliant with this principle during the 2008/9 financial year.
For further information contact: Bina Mani