A Reuters report last week said that French banks have promised to close all their operations in OECD grey-listed jurisdictions may well be an indication of what might happen in the future in relation to the presence of international banks in the so-called tax havens.

Granted, France’s main banks have a relatively modest presence in the Caribbean territories compared to British and American banks, and the Cayman Islands is no longer on the OECD grey-list.

However, it is difficult to refute the perception that we are, nevertheless, a tax haven, no matter how much of a “tax-neutral portal” we try to portray ourselves to be. As the New York Times pointed out in its Saturday edition, we are “a tropical paradise that has never taxed income, property, corporate earnings, retail sales or capital gains.”

Indeed, our success as an offshore financial centre may be our own undoing as, again in the words of the New York Times, “Britain appears determined to make an example of a place that has become a worldwide symbol of secrecy and intrigue.”

We have pointed out on several occasions that the British government may find it politically difficult, if not impossible, to allow UK banks that have received billions of dollars in bail-out funds from British taxpayers to continue to allow them to maintain operations in the Cayman Islands when we are, as mentioned, very much perceived to be a tax haven that actively facilitates the avoidance and/or evasion of taxation.

We have said over and over again that the importance in this respect rests not so much in the reality of claimed tax-neutrality but in the perception of being a tax haven in its derogatory sense.

Perhaps this is another reason why the British government is being so insistent when it comes to sorting out our current financial difficulties – the last thing it wants politically is to be seen to be giving us an easy ride or, even worse, bailing us out – even though much of the world’s media seems to have firmly grasped the wrong end of the stick in this regard.

Be that as it may, there is no doubt that not only does our immediate financial situation need to be sorted out but our long-term economic model has to evolve into something more sustainable than that which we currently have, and the forthcoming move by the French banks should be seen as yet another indication (if one were needed) that this necessity can be neither ignored nor denied.

The Leader of Government Business, Hon. McKeeva Bush, is quoted by the New York Times as saying that the resolution of our immediate difficulties “is a question of how much pain the people of Cayman and the business community will accept.”

Regrettably, all the pain in last week’s budget seems to be falling on the private sector, with little more than high-sounding platitudes being offered in place of real and meaningful government cutbacks, except, of course, when it comes to its failure to pay its own local contractor and other suppliers, which in turn exacerbates the liquidity squeeze being experienced by local businesses.

And not only is the pain being felt by the private sector in general, it seems to be focused specifically on small businesses in particular.

The proposed 10 percent business premises tax is apparently to be calculated on the amount of rent paid by the business in question. In other words, the larger and wealthier businesses that own their own premises will escape it entirely.

Rents are high enough already – some might say unnecessarily so – and for some small businesses, an effective 10 percent increase in rent could mean the difference between survival and failure.

As we pointed out previously, much of the budget increases will negatively affect the cash flow of small businesses locally – including the increase in work permit fees and import duties – while little or no provision is made to provide the essential liquidity to the local economy.

The government seems to be focused primarily upon preserving itself and its privileges, by taxing local residents and small businesses, with little or no attention being given to creating or generating new economic output.

Generally speaking, new and/or increased taxes have the effect of suppressing business activity and wealth creation and, although we realise that money has to be found from somewhere to cover the budget deficit, let’s at least be fair in its impact – with the wealthy merchant class and the financial sector being required to pull more of its weight.