The delay by the British Government in signing off on funding arrangements in the Cayman Islands is becoming a major cause for concern among leading business practitioners, according to the Cayman Islands Financial Services Association.

Anthony Travers, chairman of CIFSA and the CI Stock Exchange, says: “The latest signs from the Foreign and Commonwealth Office is that they do not want to turn this short term budget issue into a war but they would like to see some measured cuts in public spending. That seems entirely reasonable.

“Our information also indicates that The Minister for Overseas Territories, Chris Bryant, is not going to die in a ditch demanding we bring in income tax. However all the signs are that they are still looking for a payroll tax and that is a cause for grave concern.

“I have canvassed senior business players in Cayman and they have indicated that at the first sign of a payroll tax they will have to consider their options. I believe this will inevitably lead to job losses and it will affect both the highly paid and more junior members of staff and lead not to a revenue increase but a decrease. The move from indirect to a direct system of taxation is a seismic shift which has not been thought through and which is not justified on the facts.”  

Travers says t FCO’s “sniping” at hedge funds plays into the hands of EU legislators who are trying to “curb the success of The City of London and in particular the hedge fund industry”.

“In short if the FCO attack the Caymans, they damage London. I would have thought in the current financial crisis that would be a horrendous example of unintended consequences.

“I urge the FCO to acknowledge that the CI Government has put forward sensible ideas to cut costs and raise revenue without the introduction of totally unnecessary taxes and allow the CI Government to borrow the relatively small amount of money it needs to carry out its business.”