Payroll tax revenue report held

Open
records requests made by the Caymanian Compass to obtain a copy of a 2009
payroll tax study done by the Cayman Islands government have been deferred by officials
with the Ministry of Finance.

The
deferral was made under section 11(2)(c) of the Freedom of Information Law
(2007), which deals with the premature release of public records, which would
be considered contrary to the public interest.

The
measure allows government to delay a record’s release for an unspecified period
of time until “the release of the record would not be contrary to the public
interest”. The Compass can appeal the deferral, first to the ministry and then
to the Information Commissioner’s Office, if it wishes. 

A
section of the payroll tax study, which was completed in September 2009 by the
Economics and Statistics Office, was revealed as part of the Miller Commission
report earlier this year.

The
Miller Commission review opined that payroll taxes, as a way to raise Cayman
Islands government revenues, would be a “less risky” option for Cayman compared
to an income tax. Indeed, the Miller report pointed out that Cayman’s current
work permit system operates with many of the attributes of a payroll tax.

“A
payroll tax certainly is capable of generating substantial revenue,” the Miller
report stated. “But even a well-designed social insurance levy would have
adverse effects on the Cayman economy, as acknowledged in the Economic and Statistics
Office report on payroll tax alternatives.”

The
statistics office review, titled A Proposed Payroll Tax for the Cayman Islands,
noted that private sector compliance with payroll taxes tended to decline the
higher those rates went.

Also,
the statistics office report noted that gross domestic product and employment
rates would be negatively affected by a payroll tax, by an estimated 4.4 per
cent between 2010 and 2015, given an 8 per cent payroll tax, and possibly 6.2
per cent, given a 10 per cent payroll tax.

“It
is projected that total employment in the Cayman Islands could fall annually by
1,600 (under the 9 per cent tax scenario), up to 2,300 (under the 12 per cent
tax scenario) during the period 2010-2015,” the statistics office report said.

The
Miller Commission ended up opposing a payroll tax, particularly if it came on
top of the current permit fees charged to all companies in the Cayman Islands
that employ foreign workers.

Premier
McKeeva Bush has repeatedly stated that he would not accept direct taxation as
a way to raise Cayman Islands government revenues.

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