ECONOMY AND TOURISM IN THE CAYMAN ISLANDS


Economy

With an average income of around KYD$47,000, Caymanians have the highest standard of living in the Caribbean. According to the CIA World Factbook, the Cayman Islands GDP per capita is the 14th highest in the world. The islands print their own currency, the Cayman Islands Dollar (KYD), which is pegged to the U.S. dollar at a fixed rate of 1 KYD = 1.25 USD.

The government's primary source of income is indirect taxation: there is no income tax, capital gains tax or corporation tax. An import duty of 5% to 22% (Automobiles 29.5% to 100%) is levied against goods imported into the islands. Few goods are exempt; notable examples include books, cameras and infant formula.

Tourism
One of Grand Cayman's (GCM) main attractions is Seven Mile Beach, on which a number of the island's hotels and resorts are located. Historical sites in GCM, such as Pedro St. James Castle in BoddenTown, also attract visitors. Tourists also visit the Sister Islands, Little Cayman and Cayman Brac.

All three islands offer scuba diving, and the Cayman Islands are home to several snorkeling locations, where tourists can swim with stingrays (including Stingray City, Grand Cayman). There are two shipwrecks off the shores of Cayman Brac, including the MV Keith Tibbetts.

USS Kittiwake (ASR-13) was decommissioned on 30 September 1994 and struck from the Naval Vessel Register on the same day. Her title was transferred in November 2008 for an undisclosed amount to the government of the Cayman Islands. The Cayman Islands government intended to use Kittiwake to form a new artificial reef. Originally intended to be sunk off Seven Mile Beach, Grand Cayman in June 2009, it was finally sunk on 5 January 2011.

Other Grand Cayman tourist attractions include the Ironshore landscape of Hell, the 23-acre (93,000 m2) marine theme park Boatswain's Beach, also home of the Cayman Turtle Farm, the production of gourmet sea salt, and the Mastic Trail, a hiking trail through the forests in the centre of the island. The NationalTrust for the Cayman Islands provides guided tours weekly on the Mastic Trail and other locations.

Financial services industry
The Cayman Islands are a major international financial centre. The biggest sectors are "banking, hedge fund formation and investment, structured finance and securitization, captive insurance, and general corporate activities." Regulation and supervision of the financial services industry is the responsibility of the Cayman Islands Monetary Authority (CIMA).

The Cayman Islands are the fifth-largest banking centre in the world, with $1.5 trillion in banking liabilities. There are 279 banks (as of June 2008), 19 of which are licensed to conduct banking activities with domestic (Cayman-based) and international clients, the remaining 260 are licensed to operate on an international basis with only limited domestic activity. Financial services generated CI$1.2 billion of GDP in 2007 (55% of the total economy), 36% of all employment and 40% of all government revenue. In 2010, the country ranked fifth internationally in terms of value of liabilities booked in the Cayman Islands and sixth in terms of assets booked. It has branches of 40 of the world’s 50 largest banks. The Cayman Islands are the second largest captive domicile in the world with more than 700 captives, writing more than US$7.7 billion of premiums and with US$36.8 billion of assets under management.

There are a number of service providers. These include global financial institutions including HSBC, UBS and Goldman Sachs; over 80 administrators, leading accountancy practices (incl. the Big Four auditors), and offshore law practices including Maples & Calder.

Since the introduction of the Mutual Funds Law in 1993, which has been copied by jurisdictions around the world, the Cayman Islands have grown to be the world’s leading offshore hedge fund jurisdiction. In June 2008, it passed 10,000 hedge fund registrations, and over the year ending June 2008 CIMA reported a net growth rate of 12% for hedge funds.

Starting in the mid-late 1990s, offshore financial centres, such as the Cayman Islands, came under increasing pressure from the OECD for their allegedly harmful tax regimes, where the OECD wished to prevent low-tax regimes from having an advantage in the global marketplace. The OECD threatened to place the Cayman Islands and other financial centres on a "black list" and impose sanctions against them. However, the Cayman Islands successfully avoided being placed on the OECD black list in 2000 by committing to regulatory reform to improve transparency and begin information exchange with OECD member countries about their citizens

In 2004, under pressure from the UK, the Cayman Islands agreed in principle to implement the European Union Savings Directive (EUSD), but only after securing some important benefits for the financial services industry in the Cayman Islands. As the Cayman Islands are not subject to EU laws, the implementation of the EUSD is by way of bilateral agreements between each EU member state and the Cayman Islands. The government of the Cayman Islands agreed on a model agreement, which set out how the EUSD would be implemented with the Cayman Islands.

A report published by the International Monetary Fund (IMF), in March 2005, assessing supervision and regulation in the Cayman Islands' banking, insurance and securities industries, as well as its money laundering regime, recognised the jurisdiction's comprehensive regulatory and compliance frameworks. "An extensive program of legislative, rule and guideline development has introduced an increasingly effective system of regulation, both formalizing earlier practices and introducing enhanced procedures," noted IMF assessors. The report further stated that "the supervisory system benefits from a well-developed banking infrastructure with an internationally experienced and qualified workforce as well as experienced lawyers, accountants and auditors," adding that, "the overall compliance culture within Cayman is very strong, including the compliance culture related to AML (anti-money laundering) obligations."

On May 4, 2009, United States President Barack Obama declared his intentions to curb the use of financial centres by multinational corporations. In his speech, he singled out the Cayman Islands as a tax shelter. This perhaps referred to Ugland House, a financial institution in the Cayman Islands.

The next day, the Cayman Island Financial Services Association submitted an open letter to the President detailing The Cayman Islands' role in international finance and its value to the US financial system.

Labour
The Cayman Islands has a small population and therefore a limited work force. Work permits may therefore be granted to foreigners. On average, there have been more than 21,000 foreigners holding valid Work Permits.

Work permits for non-citizens
In order to work in the Cayman Islands as a non-citizen, a work permit is required. This involves passing a police background check and a health check. A prospective immigrant worker will not be granted a permit if certain medical conditions are present which include testing positive for syphilis or HIV. A permit may be granted to individuals on special work.

A foreigner must first have a job in order to move to the Cayman Islands. The employer applies and pays for the work permit. Work permits are not granted to foreigners who are in the Cayman Islands (unless it is a renewal). The Cayman Islands Immigration Department requires foreigners to remain out of the country until their work permit has been approved.

The Cayman Islands presently imposes a controversial "rollover" in relation to expatriate workers who require a work permit. Non-Caymanians are only permitted to reside and work within the territory for a maximum of seven years unless they satisfy the criteria of key employees. Non-Caymanians who are 'rolled over' may return to work additional 7 year periods subject to a 1 year gap between their periods of work. The policy has been the subject of some controversy within the press. Law firms have been particularly upset by the recruitment difficulties that it has caused. Other less well remunerated employment sectors have been affected as well. Concerns about safety have been expressed by diving instructors and realtors have also expressed concerns. Others support the rollover as necessary to protect Caymanian identity in the face of large immigration of expatriate workers.

Concerns have been expressed that in the long term, the policy may damage the preeminence of the Cayman Islands as an offshore financial centre by making it difficult to recruit and retain experienced staff from onshore financial centres. Government employees are no longer exempt from this "rollover" policy according to this report in a local newspaper. The governor has decided to use his constitutional powers, which give him absolute control for the disposition of civil service employees to determine which expatriate civil servants are dismissed after seven years service and which are not.

This policy is enshrined in the Immigration Law, written by the United Democratic Party government, and subsequently enforced by the People's Progressive Movement Party government. Both governments agree to the term limits on foreign workers, and the majority of Caymanians also agree it is necessary to protect local culture and heritage from being eroded by a large number of foreigners gaining residency and citizenship.