Leader of Government Business McKeeva Bush warned Cayman residents several weeks ago that new taxes were going to be required to get the Cayman Islands through its current financial predicament.
He also let it be known that businesses would have bear the brunt of the new revenue measures.
True to the warnings, the recent budget unveiled for the 2009/10 financial year contains several revenue measures that will affect the bottom line of businesses.
Increased import duties will raise costs for every business and probably reduce sales. A business premises tax on leased commercial property will increase costs for businesses, and if the market won’t allow them to pass those costs on, will reduce profits.
Then there are large increases in work permit fees, which will be theoretically offset by the suspension of the requirement to match employees’ pension payments. Of course, employers might find they have to compensate expatriate employees for the loss or risk losing them.
While all of these measures have the potential to hurt employers, Mr. Bush gave the impression that that impact would be offset by less protectionist immigration policies. Indeed, businesses would likely accept higher taxes more readily if they knew they were able to get work permits and key employee status for the foreign workers they need to stay competitive.
The problem is that there seems to be a disconnect between what Mr. Bush said was going to happen and what is in fact happening. We’ve received several reports of companies having key employee applications turned down for vital expatriate workers. As a result, jobs are actually leaving the island and more might follow.
Of course, it might take some time to put the government’s action plans in place before businesses start seeing results. The government had better hurry, though, because expecting businesses to accept increased taxes without giving the promised benefits is a formula for disaster.