There is a real crisis brewing. One that is going to take a unified, global effort to avoid. The problem is the government of the Cayman Islands is headed for bankruptcy and, in a chilling development, may consider instituting taxes to save itself. After betting big that continued growth in its financial sector would cover its $67.5 million budget deficit, the past two years have driven the original tax haven in the sun into begging the mother ship in the UK for £190m in emerging bailout funds. But, so far, the news has not been good.
"I fear you will have no choice but to consider new taxes - perhaps payroll and property taxes," (junior Foreign Office minister Chris) Bryant wrote to (the leader of government business William McKeeva) Bush. "I understand, of course, that in so doing you will want to consider carefully the implications for Caymans' economy, including the financial services industry."
With tax havens from Switzerland to Vanuatu quitting the game on a daily basis, there seems to be a simple solution to the Caymans' problem. If the worst thing hedge funds fleeing London have to worry about is the interaction between British skin and Caribbean sun, that seems like a small price to pay.
Bankruptcy threat brings new concept to the Cayman Islands ... taxes [Guardian]