Cayman Islands ordered to reduce deficit by 2013
Britain is urging the Cayman Islands to find new revenue sources and diversify its struggling economy after ruling out direct taxation.
The British territory's government also needs to reduce public spending and create a three-year plan to cut the deficit by 2013 to present "a more positive image as a financial centre," Colin Roberts, overseas territories director at the British Foreign and Commonwealth Office, said in a statement released Friday.
He said Britain would be open to talking about borrowing requirements once it was satisfied with a plan to balance the budget. A draft of the plan is due by the end of this month, he said.
Last year, the Cayman Islands was operating with a US$100 million deficit, and had negotiated bank loans of up to US$465 million.
The territory's economy has been boosted by its traditional role as a leading offshore financial center, with roughly 80,000 companies currently registered.
But such enterprises have been fleeing the Caribbean recently, fearful that proposed US legislation and regulatory measures could increase their tax burden.
The Cayman Islands' government levies no income, corporate, capital gains or property taxes, despite Britain's urging last year that it do so.