Payroll tax back on table


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
recent weeks.

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.


Issuing a limited amount of casino licences is one recommendation made by the Cayman Islands National Investment Council that could avoid the need of payroll or other direct taxes.
Photo: UPI

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  1. Payroll tax = mass exodus. What is the point having payroll tax when there will be minimum expats here to pay it and businesses close down and move to greener pastures. There are so many other things to explore first if the government had the political will.

  2. “Mass exodus?” I don’t think so, to seek greener pastures where.. Un-employment is up all over the world except maybe China; and they have payroll tax.
    With taxes countries mass armies. Poor/rich Cayman cannot even afford to own their own government H.Q. By the way, I did not say Bye..

  3. I believe when one climbs the ladder of success, one muct give back to the community – the same community that has helped one to achieve their status in society. Hence, unlike those who call it “theft,” to tax can be beneficial for society as a whole. The question is, what kind of tax should government implement? And where should the monies for the tax be funneled? Of course, I can’t see a VAT tax being fair, because what happens if you are not working and you can’t afford to buy basic things like food to support yourself. So VAT is a no-no! And most definitely, we wouldn’t want a tax that will hurt our banking and financial industry. The reason why people come here to bank is because we don’t tax the banks! So any tax that will hurt our clients is not smart and will ruin our economy. Also, I would not like to know that we are being taxed just to feed civil servants! Where is the tax funds going towards? Are the funds going towards education, health, and social welfare – or are they going into the pockets of God-knows-who? These are important questions to ask!

    In sum, out of all the tax I can think of, a Payroll tax seems to be local and fair to a better degree. It may have its bad, but it seems to me better than most tax and makes sense! You are contributing back to society to help society as a whole. You climb the ladder to reach the top – who got you there??? So you are oblige to give back. Payroll tax comes directly from your pay. It is not harming our banking clientele.

    And to me, what will make the Payroll tax MORE fair, is when it is NOT a FLAT TAX- where low-wagers have to pay the same amount as middle and upper class citizens. That should not be! A FLAT TAX IS NOT ETHICAL! A man or woman with kids making lower than 2500 a month, shouldn’t have to pay the same tax-deduction as an MLA making 12,000 a month. The MLA or rich man would feel nothing, but the poor man or woman with kids, would feel alot if 5% or 10% were deducted from their salary. So people’s salary scale should be considered in what amount people should pay their tax. That is just making the Payroll system MORE fair!

    Finally, I do hope people consider a FAIR’ Payroll taxing system. Where the funds would be channeled if it is implemented is also very important! Cayman can not continue living in debt and relying on custom duties and fees. All we have is tourism and banking to really rely on. So we need to implement some form of “sustainable revenue” that would benefit everyone.

    Anywayz… that is my 2-cent!

    God Bless

  4. This is the most ridiculous thing…how can anyone here afford anymore tax…The Government can’t even control the money they have coming in now let’s just give them more…maybe they can build another school that lacks any sort of real education…they are like a 4 year old in a candy store…It’s bad enough these people are allowed to make any desicion’s at all. I have never seen such disregaurd for common sense and such poor managing skills. The End is near…I think the UK should just let the islands become independant and we will see how well these fine and intellegent people do with no support…FREE CAYMAN and watch it fall

  5. Hopefully the income tax isn’t for everybody. Individuals or families, for example, who make $75,000 or more could perhaps pay the 5% income tax and not really notice it, especially if their employer pays for their accommodation. Those who make less money annually, like single moms or couples with minimal income such as hairdressers, secretaries, chefs and potwashers, who have to pay for their own accommodation via rent or a mortgage and have children who need daycare, who therefore have a higher grocery bill and less financial ability to go spend on entertainment would have more of an issue having that 5% taken away when they are living from paycheque to paycheque as it is.

  6. Now there’s a good solution! That’s a sure way to get to rid of all those nasty little expats and the firms they work for and you solve at least one problem – no more gripes from residents – big happy smiles all round on that one.

    As for your budget woes?

    I’m not sure where you are going to recoup all the revenue lost on work permit fees when there are none; loss of revenue generated from the real estate market when buildings and homes stand empty; not to mention the loss in the tourism industry sector which those pesky expats generate with family and friends visiting the islands annually and they themselves contribute to when they take staycations or visit The Brac or Little Cayman PLUS the local economy goes into a proper recession because you only have your (now) happy (but income taxed) residents spending money and no expats using their hard cash to dine, drink, drive, live, shop and support this island.

    Oh I’m sorry, we’re talking about income tax.

    Yes go on then, let’s see how that works out.

    I’m just saying…

  7. Exodus Yes – Companies will just end up defraying costs back to employees who will not see any increases in pay – or just leave to set up business elsewhere. Given the high cost of living on this island because of all of the indirect taxation paid – greener pastures are elsewhere given payroll tax or not. I hope that the Caymanians can make a good deal of money from fishing and tourism. But then there will not be enough people locally to support the restaurants and other touist related activites who can not survive on tourists alone so there will just be a decrease in the variety of options for tourists and tourism will decline. And that is just the start of it…….so much for variety and choice of products and services locals get on island at increased cost because there will be minimal savings by business owners as they will not be able to buy in bulk……etc…etc…