Today’s Editorial September 22: A taxing problem

During the course of this week, Cayman residents will learn just how much it will cost them to help dig the government out of its financial hole.

There’s a good chance the word ‘tax’ will be used and even if it’s not, a tax by any other name will smell as foul.

The problem with implementing any new tax in the Cayman Islands is how to collect it. Besides Customs and Land Registry, few attempts at collecting taxes or fees have been successful here.

Cases are rampant of employers collecting pension or insurance payments and not paying them over to the insurers and pension providers. Any kind of payroll tax is likely to run into the same kind of problems.

Too many Cayman Islands businesses, small ones in particular, have substandard accounting systems and intermittent cash flows. Even without intent, employers could find themselves afoul of the law.

The only reason employers pay over deducted taxes to the governments in other countries is that they go to prison if they don’t. Unless the Cayman Government is willing to jail employers for not paying over payroll taxes, it had better consider a different way of raising revenue.

Raising customs duties makes sense because there is already a system of collection in place. A property tax could be easily implemented because the government controls the land registry.

If those options aren’t desirable, there is another way government could effectively collect taxes – through a utility company. If a utility were to bill a community service fee to households, it could then collect the fee and pay it over to the government. The fee would need to be paid in order to keep the utility service.

If more or new taxes must come, then finding a collection method that is realistic and won’t grow the size of civil service is the way to go.