Property and financial sectors keep CIG in the black

| 11/08/2022 | 110 Comments

(CNS): The coercive revenue that government has collected so far this year from property sales and the financial sector is keeping the government coffers full and the books in the black despite a significant increase in public spending over the last six months. Government has spent over $50 million more than forecast in the budget but it still achieved a surplus of $159 million, which is $14 million more than projected, because of the record-breaking revenue of over $636 million it has collected so far this year.

In the latest unaudited government accounts, which were gazetted yesterday after being presented to Cabinet this week, public finances remain solid, even though government spending reached historic levels.

A significant amount of the government’s additional surplus is due to property sales, which, although it was the only main revenue stream for government that actually decreased compared to 2021, nevertheless generated far more than forecast.

The sale of property generated an additional $18.2 million over the budget as a result of volume and value. Financial service sector fees collected by both CIMA and the general registry amounted to $9 million more than expected, while work permit fees also generated an additional $6.5 million more than forecast, as the economy recovered from the pandemic shutdown and tourism stakeholders began recruiting again.

Finance Minister Chris Saunders said he was pleased with the government’s financial performance because it demonstrated Cayman’s recovery from the impact of COVID-19 and gave government the room it needs to help people in the face of global inflation.

“We are fortunate to be in a surplus position, which allows us to continue with our programmes to alleviate cost of living concerns for local families,” he said.

The revenues at the end of the second quarter were $34.8 million better than budgeted and an improvement of over $100 million (about 19%) over pre-COVID 2019.

“This continues the overall trend of better than expected revenues since the start of the year, and particularly demonstrates ongoing confidence in our financial services sector and the post-COVID recovery of our economy,” Saunders said, as his ministry released the details of the half-year numbers.

“We recognise, however, that there continue to be challenges to overcome, especially with regard to current global economic trends. And closer to home, while our tourism sector continues in its recovery, it will be some time before we get close to pre-pandemic levels. The silver lining in all of this is that our revenues and surpluses thus far will help us to ride out any upcoming bumps in the road.”

With most revenue streams doing better than last year, government has been able to absorb the increase in spending caused by inflation and support for those in need without going into the red and is on track to exceed its forecast surplus for this year.

Premier Wayne Panton welcomed the results, stating that the government would maintain the surplus to the year-end, even though much of the expected annual revenue has now been collected.

“The second quarter financial results once again underscore the PACT Government’s commitment to fiscal discipline and supporting a strong, resilient economy in the face of unprecedented global challenges,” he said. “We recognise that most of the government revenues are collected in the first half of the year and our obligation is to maintain the fiscal discipline throughout the second half.”

Thanking Saunders for his diligence and the other members of government, he said achieving the results was also due to many public servants who work conscientiously every day to serve the public and deliver value for money. “The government’s financial success is achieved in partnership with the civil service,” he added.

See the full report in the CNS Library.


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Category: Government Finance, Politics

Comments (110)

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  1. Anonymous says:

    Hmmmm… I would love to hear about a very strong rebound in tourism too driving this development or migration but maybe the last wouldn’t be popular. Otherwise potential exist for the whole development boom to be speculative and subject to a correction. I think there are more forces to say it is a genuine industry being driven like financial services e.g. tax structuring on a personal level but, I also think sections of the market are being pulled along too without much regard for it.

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  2. Anonymous says:

    A positive report on the importance of development and finance sectors in Cayman.

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  3. Anonymous says:

    Bubble soon burst

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    • Anonymous says:

      And what is your expertise and rationale to conclude on why the financial sector here, which is 80 per cent of the cayman economy and largely driven by qualified expats as most caymanians seem to lack such professional qualifications or willingness to work long hours, will soon burst?

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    • Big Bobo In West Bay says:

      1:59, If the bubble is not burst by another Hurricane Ivan soon.

      The water temperatures in the Atlantic Ocean are ridiculously high for August.

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  4. Anonymous says:

    Park the free gas guzzlers nights and weekends.
    Give back the unconscionable MP salary increase.
    Cancel the defunct Miss Cayman pageant.
    Luxury tax must come!

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    • Anonymous says:

      Yes, your assets and property to be the first on this list for taxation, starting with US taxation since you depend on it for food, energy and travel. Then we can talk about your new local property, income and vat taxes. No you don’t just get to volunteer *others* for your taxation aspirations, lead the way with your *own* damn income!

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  5. Anonymous says:

    The free magazines displayed everywhere answer your question. The advertisers and writers are promoting the developments as excellent wealth growth opportunities, urging foreign investors to “Live Grand”.

    The concerted marketing campaign train for the wealthy is never stopping.

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    • Anon says:

      Same in any country (or territory)

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      • Anonymous says:

        Wrong. Some countries actually stopped foreign investors such as Canada, for one.

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        • Anonymous says:

          And so Canada has to tax the hell out of it’s citizens to pay it’s bills.
          Cayman can’t do that .

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        • Johnny Canuck says:

          Yes, because foreign investors bought houses and condominiums in Toronto and Vancouver and left them empty while there was a serious housing shortage in both cities.

          A pure attempt at real estate speculation which when on such an obscenely large scale has a negative impact on most of society in urban Canada.

        • Miami Dave says:

          Canada certainly needs no more foreign investment in their real estate sector. There is easily enough investment money within the country.

  6. Anonymous says:

    The USA requires that all visitors be vaccinated.

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  7. Anonymous says:

    It says unaudited, so judging by cayman politicians track record is this really a surplus?

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  8. Anon says:

    Can we help the economy by getting rid of travel Cayman? Sure would be nice to have some friends come visit that dont fit the “yesterdays news” vax guidance. For heavens sake, our mother country got rid of all that stuff many months ago!

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  9. Anonymous says:

    OUTRAGEOUS that there’s a surplus budget of that size and Cayman’s public school system is pathetic. This is coming from an expat. Cayman should have 1st class education having a surplus budget which is extremely rare across the world. Top quality teachers, small classrooms and strict discipline. Semester exchanges to other countries would “open Caymanian kids eyes” to what the real world is like. Politicians have no excuse on why this isn’t occurring with all that cash. Since I spoke this far also push for birth control and try to stop the cycle of poverty of single parent mothers knocked up raising 3-6 kids. Crazy!

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  10. anon says:

    whether you are for development or not. Its a huge industry in Cayman

    The Progressives were more development orientated. And the current influx of stamp duty funds on previous pre construction projects now coming to fruition have assisted this current PACT administration.

    PACT please don’t boast about how well you are doing you are living off the policies of the Progressives.

    The problem the next administration are going to have( which wont be PACT because they are useless)
    There will be a lot less stamp duty payments coming down the pipe because PACT are anti development and cant even produce a development plan.
    Stats prove there are less developers getting current approval. Even the biggest developers on island are taking a back seat until a development plan is produced. Which wont be for the next 3 years? Not sure how government will finance in the future But it wont be because of PACT amazing policies.

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  11. Orrie Merren 🙏🏻🇰🇾 says:

    If feasible owing to CIG surplus, a Cayman Sovereign Wealth Fund should be established for long term socio-economic prosperity.

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    • Anonymous says:

      Mr Merren, some of us begged Jim Bodden to do this when the money started pouring in with the condo boom in the late 70s/early 80s. But no, he refused. Can you imagine how much money would be in such a wealth fund now if he and subsequent politicians had resisted the temptation to spend every dollar earned like drunken sailors?

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    • Anonymous says:

      A wonderful and long overdue concept Orrie. May I suggest that for now the Government just take 5% of its income and invest it in the same investments and in the same way that the government pension fund is operated. Treat it like an ongoing core expense. That way there will be no opportunities for kick-backs or waste. The existing systems used most efficiently and within a half century all in Cayman would be in the most successful and sustainable society on earth.

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      • Orrie Merren says:

        Good suggestion. I hope such good advice doesn’t fall on deaf ears (figuratively speaking).

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    • Anonymous says:

      Ganja freeness.
      No weeds no votes.

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  12. Anonymous says:

    and what is the plan when the recession hits?
    property develpment is already stalling with most developers stopping new develpments for the next 18 months.
    cig uncontrolled spending will bankrupt cayman again.

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  13. Anonymous says:

    So how does this surplus benefit the people that can’t afford the higher cost of just living ?

    When you have a 150 million surplus and 650 families that are hungry, then there is absolutely nothing to be proud of.

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  14. Anonymous says:

    So we will still have a surplus at the end of the year? It seems to me this happens every year, mid year surplus, end of year deficit. We’ll see. Also, haven’t heard anything recently about the huge unfunded liabilities arising from future civil service costs. Did those just disappear?

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    • Anonymous says:

      Yes, under the rug!

      Without that it’s impossible to know if this is a real surplus. Also hard to see if it includes capex and debt interest, which are traditionally excluded from “primary surplus” which is the number governments always tout in the press because it’s more favorable.

  15. Anonymous says:

    This is nothing more than poor budgeting and as a result setting the bar way too low. The bottom line is that this is nothing more than a Ponzi scam where you have more development to keep feeding the monster in this case CIG. If you ever wondered why CPA will approve anything this is your answer. If the real estate market fails (and it’s already started) Cayman
    and the CIG are screwed.

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  16. Anonymous says:

    Frustrated Caymanian says:
    11/08/2022 at 9:37 pm
    “which allows us to continue with our programmes to alleviate cost of living concerns for local families”…..*one of those concerns Mr. Saunders is stamp duties for Caymanian home buyers* Is this going to happen ?

    This has already happened. Pay attention before posting.

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  17. Anonymous says:

    Who can we blame for this world class performance. I know who we would blame if we were in a deficit.

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    • Anonymous says:

      Thank Maples. The success is mostly in spite of our civil service, not because of it.

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    • Anonymous says:

      What about the earnings from work permits?
      Why is this never mentioned?

      CNS NOTE: As noted in above article (see para 4)….. The sale of property generated an additional $18.2 million …Financial service sector fees collected by both CIMA and the general registry amounted to $9 million more than expected, while work permit fees also generated an additional $6.5 million more than forecast….

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  18. Anonymous says:

    @7:51 imagine where we will be in the not too distant future, when the well runs dry and government needs to keep feeding the dependency monster they created, called “those in need”. Think direct taxation!

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    • Anonymous says:

      7:09, we should have introduced some form of direct taxation many years ago. Perhaps a Community Development Charge ( aka property tax!) on all property over a certain value ( for example not applying to a half acre lot in the Hutland but yes applying to a half acre in Vista Del Mar!).

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      • Anonymous says:

        Introduce taxation and watch the mass exodus.
        If you’re going to pay tax, May as well do it in a country with half the cost of living, and none of the Jamaican style politics, crime and political corruption.

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        • Anonymous says:

          Very doubtful it would result in mass exodus, 4:44. That’s like saying all development projects need waivers/incentives built in. We are paralyzed by such fears which are almost certainly groundless and lead to us being taken for fools and opening up our country far far too easily for anyone to come and do/buy what they want.

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          • Anonymous says:

            Lol. If you say so. It’s the only reason to be here. I don’t know a single person who would stay if we introduced direct tax but sure you roll that dice if you want to.

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        • Anonymous says:

          BS scaremongering.

          Most people around the world pay their own way and then some. Here in Cayman everyone (Caymanian and expat, rich and poor) expects the financial industry to subsidize their public services.

          The government should introduce a 0.5% tax on all property over $1m with an exemption for any Caymanian earning under $150,000.

          Wealthy residents should start to pay their own way while the largesse from the financial industry benefits the Caymanian people collectively (starting with funded liabilities and decent education as many others have noted).

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  19. Anonymous says:

    These financial results are the product of not knowing what will be collected or spent, not of fiscal prudence

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  20. Say it like it is says:

    When did Cayman Airways last produce audited accounts?, the public have a right to know how much more the airline is costing us.

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  21. Anonymous says:

    Once again, thank to the accounting firms for getting the Private Funds Act passed and the increase in scope of funds covered under the Mutual Funds Act.

    No thank you the law firms and most directors, who opposed this at every turn. The law firms LOST (actually, a complete shut out — everything scoped in). And now the big 2 firms are involved in the Fund Annual Return preparation business — I thought you guys were completely against FARs?

    As the accountants predicted, the sky didn’t fall; in fact, it was raised and brightened. 27,000 registered funds.

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    • Anonymous says:

      So to be clear, you admit that it was, in part, a shake down by the auditors (i.e. driven by revenue rather than what was legally sensible, justifiable or fair)?

      Glad to see some honesty.

      Ultimately, the impact of becoming less relatively competitive is going to need to be judged over decades, not 24 months.

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      • Anonymous says:

        Hello lawyer. Less competitive? Dont let facts get in the way. Latest SEC statistics on private funds show NO diminution in Cayman’s relative position to other jurisdictions.

        See PDF page 14 (actual page 13) for SEC’s latest statistics. US in the 50%s, Cayman in the 30%s — next competitor in the low single digits. Checkmate.

        https://www.sec.gov/divisions/investment/private-funds-statistics/private-funds-statistics-2021-q4.pdf

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        • Anonymous says:

          Again, judge by long term, not short term.

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        • Anonymous says:

          No dispute it was a shake down then?

          Thanks.

        • Anonymous says:

          Funnily enough, not everyone who sees through your fallacies is a lawyer.

          I’ll bet you would enjoy falling off a cliff on the basis that you hadn’t yet hit the ground – so far so good huh?

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        • Anonymous says:

          The issue is not whether the number of funds has decreased. Everyone was on board with the Private Funds Act being brought in to regulate entities that are actually funds. The issue is that the Private Funds Act was amended a month before the deadline for registrations in 2020 so as to widen the net to such an absurd extent that the Act now requires regulation of all manner of entities that aren’t in fact funds. Try explaining to the top US law firms and investment managers why the simple holding company they need to set up on short notice is actually considered a fund under Cayman law, and then set your stopwatch to see how long it takes for them to ask for a referral for a BVI law firm or to decide Delaware will be fine after all. The absurdly wide regulatory net for private funds doesn’t drive away the entities that are actually and reasonably classified as private funds (hence Cayman maintaining its position in the SEC report you cite). It drives away the entities that shouldn’t be classified as funds but the ridiculously wide Private Funds Act still catches.

    • Anonymous says:

      So to confirm – if the main test here is whether or not the government makes revenue, you would be in favour of allowing the audits to be done by accounting firms off Island, provided they are suitably regulated?

      Ask some of the colleagues of the auditors based in other offices how they feel about the naked self-interest dressed up as regulatory probity.

      No issue with the rank falsehood put out that the whole process would be cost neutral?

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      • Anonymous says:

        Wait until the amount of unlicensed overseas lawyers practicing Cayman law is uncovered, which is going to be significant loss of government revenue over decades.

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        • Anonymous says:

          Those responsible should be imprisoned. It is a long-standing disgusting smear on the so called profession.

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        • Anonymous says:

          Good diversion.

          If people in Cayman are breaking the law, then they should be dealt with, but please try to stay on the point.

          1. Why not allow people to use their existing auditors outside Cayman?

          2. What happened to it all being cost neutral?

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          • Anon says:

            If you worked in a cayman audit firm you would see why.,, using non cayman auditors would make most funds non compliant and an embarrassment to the regulator cima

          • Anonymous says:

            Why not allow them use a local not cayman law firm then as well?

            • Anonymous says:

              ????

              They use Cayman qualified lawyers outside of Cayman all the time.

              What on earth are you on about?

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      • Anonymous says:

        The government, and Cayman people, should get the benefit of some of the revenue associated with thousands of previously unregulated Cayman entities that use this jurisdiction as a nameplate only. Meanwhile, the government has to fund a court system and infrastructure, and Cayman has to suffer reputationally when one of these entities goes bad.

        So yes, revenue is a valid reason. Now these previously unregulated entities are making a more meaningful financial contribution to the Cayman jurisdiction now that they are regulated, rather than just being parasites.

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        • Anonymous says:

          Except they already do, so casting them as parasites is simply not accurate.

          For each entity (and in the case of private funds, that’s generally 2 entities or more per fund structure) the government is already paid about 1k USD in total.

          Given the number of private fund structures, you’re already talking about more than enough income for the system to be of financial benefit to Cayman without the need for CIMA fees as well (upwards of 30-40m USD).

          Ultimately, you’re right that the government here has to benefit and take in money from the sector. But the question is what is fair, and the argument was always dishonestly framed in being case as being about financial probity and the adherence to international standards rather than as a fiscal issue.

          Either way, this has nothing to do with the AUDITORS seeking an unwarranted payday and could have been structured to require CIMA fees, but not so that entities that have no business being separately audited have to hand over money to partners at PWC here.

          You’ll note that the complete lack of a defence of this aspect of the law is pretty deafening in its absence.

    • Anonymous says:

      You must be so thrilled having a buisiness line producing redundant, duplicate audits that no one will ever look at. Sad.

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      • Anonymous says:

        You must be thrilled to have a business pumping out off-the-shelf offering documents that largely replicate previous documents, and then taking in 10’s of thousands in fees.

        You must be thrilled for “earning” that registered office revenue for which you largely do nothing.

        You must be thrilled charging up to $1,000 for an auditor legal letter request where you basically print a standard letter that there are no claims.

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        • Anonymous says:

          Please stop embarrassing yourself. I’m a client not a lawyer.

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        • Anonymous says:

          You misunderstand the practice of funds law, unfortunately. While there is certainly some repetition, there is thought about disclosures that need to be made – not the least of which is to keep up with CIMA’s ever changing policy regime – but also to contemplate the disclosures for which a lack would and could be seized upon by litigating investors.

          Sure, anyone can slap together something that looks like an offering document, but that does mean it does what it needs to do in order to discharge a professional’s obligation to her client.

          • Anon says:

            Exactly the same rationale goes for local cayman auditors and the multiple changes made to those audits when a cayman audit firm reviews the work of a non cayman firm before they become cima compliant

            • Anonymous says:

              Except that Cayman funds need to use Cayman law.

              They are are under no obligation to use “Cayman” financial reporting standards.

              A PWC auditor in New York is just as qualified and capable to audit a Cayman law PE structure as a Cayman based auditor and to pretend otherwise is just dishonest.

              • Anonymous says:

                Yes. The cayman audit firms advise them on cayman law daily

                • Anonymous says:

                  Then to their clients, all I can say is, good luck.

                  Sounds about as good an idea as having the Cayman lawyers providing their audit services.

        • Anonymous says:

          Someone doesn’t understand the profession at all.

          “largely do nothing” for an RO fee? Sure, other than having to run the compliance process, take on potential liability (including to CIMA), take on liability for potentially not providing correspondence, paying for CAs, paying for specialised IT software, paying a per entity fee to the government…

          No casts at all. Basically just free money right?

          If so, why not start a Company’s management business yourself?

      • Anonymous says:

        The fact that any attempt to justify the over-inclusiveness of the legislation and the push by auditors to feather their own nests by not only requiring audits for entities that don’t need them from an investor perspective, but also by requiring them to be done by those same local auditors (clients clearly can’t be allowed to use KPMG London!) by a constant reference to the legal profession only goes to show how shameless and intellectually bankrupt the whole argument is.

        Either it’s justified or it’s not. This has nothing to do with your jealousy about the legal profession.

    • Anonymous says:

      Thank the PPM! (Minus a Wayne Panton)

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  22. Frustrated Caymanian says:

    “which allows us to continue with our programmes to alleviate cost of living concerns for local families”…..*one of those concerns Mr. Saunders is stamp duties for Caymanian home buyers* Is this going to happen ?

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    • Anonymous says:

      Not sure what you think Caymanians will be able to buy even if there is NO stamp duty for us? Prices are unreachable.

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  23. Anonymous says:

    Uncontrolled development and ignoring immigration laws sure pays off…..real heros alright.

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  24. Anonymous says:

    So tourism is now the 3rd leg of our economy behind financial services and property. Yet it gets the most wasted government $$$$ in just the Turtle Farm and Cayman Airways Hmmm.

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  25. Anonymous says:

    Imagine where we might be if Cabinets kept score on their duty waivers!

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