The Cayman Islands could be facing
a 5 per cent payroll tax.
Premier McKeeva Bush made the
announcement Thursday morning.
“We’re at the point where we have
to do something. We just can’t do
nothing.” he said, adding that the Foreign and Commonwealth Office is still pushing
the Cayman Islands to implement some sort of direct taxation in order to approve
further borrowings. Mr. Bush has said the 2010-2011 budget will require more
The announcement comes after the
Revenue Measures Subcommittee of the Cayman Island National Investment Council
recommended a number of new opportunities to raise revenues.
The subcommittee, which includes Chairman
William Peguero and members James Bergstrom, Jim O’Neill, Mike Ryan and Burns Conolly,
issued the report on Monday.
“[T]he Committee would like to make
the following recommendations, which it feels provide significant revenue opportunity
to Government, while at the same time reinforcing the consumption-based model
of revenue generation that is the cornerstone of the public/private partnership
that makes Cayman unique,” the report stated.
Despite the Committee’s
recommendation of a consumption-based model of revenue, Mr. Bush turned his
attention to the payroll tax.
In its report, the Committee said
it treated cost-savings measures as being equivalent to revenue.
“As part of these recommendations
we…. have striven to generate long-term annual improvements that will not only
alleviate the immediate challenge, but also improve the costs and
competitiveness of Cayman’s public sector in the long term.”
The Committee said the total
revenue/savings impact conservatively projected to more than $100 million in
Among the measures recommended
were: to implement the proposed relocation of the indigent healthcare
“This paper has been provided to
Government whereby indigent Caymanians, who currently choose where they want to
have treatment, be relocated to qualified healthcare facilities in select
countries in the region, where they will receive quality healthcare from
certified physicians at a fraction of the current cost.
The government is spending about $30 million
annually to provide healthcare to indigent Caymanians. The Committee’s report states the recommendation
could save $20 million per year.
The Committee recommends the
government realise assets from companies struck off the company register for 10
years or more.
“Current law states that companies
that have been struck off the [Register] for more than 10 years have no right
of claim to any assets they may have held and that the assets have passed to
Government,” the report stated, estimating revenue of more than $10 from this
action in the first year.
The report also recommends the sale
of leasehold land as recommended by the Miller Commission Report.
“This is an asset that has limited
and potentially dubious potential for government in the coming century and can
also spur hundreds of millions in additional government revenue through development.”
The Committee estimated this action
could generate $53 million in additional revenues.
Another revenue measure recommended
was the annual licensing fee and registration fee of watercraft.
“The same as in other
jurisdictions, all watercraft to be licensed and inspected annually,” the
Committee wrote. “This will generate income and improve safety on the water.”
The report estimated the measure
would generate between $1 million and $1.5 million annually.
The committee recommended the
government act on the Private Finance/Big Four Committee’s recommendation to
sell the Government Office Accommodation Project (see Caymanian Compass 28
April), an action that would not only generate revenue by also remove some of the
Cayman Islands’ debt load.
The report also recommends the Government
divest public services as recommended in the Miller Report to pre-2005 levels
over the next four years.
“This is to be done in cooperation
with the private sector so that no jobs are lost,” the Committee wrote, adding
that the privatisation of public services would create growth opportunities.
“The Chamber of Commerce has
already begun a programme to retrain and retool those public sector employees
who wish to see new employment within the private sector”
The Committee estimated the annual
savings of this action would be $70 million.
Another recommendation in the
report dealt with implementing changes outlined by the Planning Review
Committee in a report dated 11 November, 2009, (see Caymanian Compass 7 January
That report, among other things,
recommended smaller lot sizes and zoning changes in large multi-use
developments. The Committee estimates
the changes could generate more than $14 million of additional revenues over
the next two years from Camana Bay and Dragon Bay alone, and about $5 million
annually from other projects.
The Committee also recommended the
government approve a limited number of casino gaming licences.
“This will improve direct
government revenue and will increase tourism activity through the creation of
new attractions,” the report stated. “Most, if not all, competitive jurisdictions
in the region have or are implementing gaming legislation.”
The limited number of gaming
licences is essential to ensure high quality and the success of the operations,
the report stated.
The report estimated annual direct
revenue of $40 million and an annual economic impact in the hundreds of
No to VAT
The report strongly advised against
a Value Added Tax, which had been publicly discussed by the government in
Some of the reasons the Committee
advised against the revenue measure were:
the cost to government to create a new tax authority to assess and
collect tax, something that would require a large number of new civil servants;
the added cost to the private sector in setting up reporting systems to file
tax returns; the poor collection record of government to be able to collect
fees or taxes in the past; the discouraging effect on new businesses; and the
likelihood of high non-compliance, especially with small companies, leading to
a likely increase in the prison population.
Mr. Bush said he did not intend to
pursue the VAT option.