Payroll tax ‘worst option’

FB protest group main

A proposed Cayman Islands payroll tax that would affect only work permit holders within the Islands may not stay limited in that way for long, according to Opposition Leader Alden McLaughlin.  

“For those who think that somehow they’re insulated from this … once government implements this system, it just takes a stroke of a pen to include Caymanians or to raise the rate from 10 per cent to 15 or 20 per cent,” Mr. McLaughlin said Thursday during an interview with the Caymanian Compass. “It is one thing to say the country is moving from a system of indirect taxation to direct taxation, it is quite another to say it is moving from no income tax to having an income tax.”  

During an address to the territory Wednesday, Premier McKeeva Bush said he had proposed implementing a 10 per cent payroll tax – not an income tax – for work permit holders only. The tax would not apply to non-Caymanian permanent residents, non-Caymanian government contract holders or Caymanians.  

As a balancing measure, Mr. Bush said he would remove legal requirements that companies and employees pay a combined 10 per cent into a work permit holder’s retirement savings accounts. Currently, 5 per cent of a worker’s salary and a matching 5 per cent contribution from their employers must be paid into a Cayman Islands pension account.  

Mr. Bush referred to the 10 per cent tax as a “community enhancement fee” during his broadcast address. He said government had a choice of taxation options and opted for the “softer”, “community enhancement fee”.  

“We have made extremely deep cuts to get the budget to this stage,” Mr. Bush said. “This still did not produce enough savings to satisfy the [United Kingdom’s] Foreign and Commonwealth Office.“  

The premier said government would not accept proposals to layoff 500 to 700 government workers and decided instead to charge the payroll tax to work permit holders that earn more than $20,000 per year.  

Opposition Leader McLaughlin said the “income tax”, as he referred to the payroll tax, was the worst possible option for Cayman and that he understood the United Kingdom had made no such requirement during Cayman’s budgeting process.  

“There are other direct taxation methods to consider: property tax, sales and excise tax, a value-added tax,” Mr. McLaughlin said. “This income tax is going to be hugely damaging to the country. It’s going to completely alter the view, from a perception standpoint, of investors. 

“I don’t have, and I don’t think the government has, the assessment necessary to make those choices right now.”  

In proposing the payroll tax, the government has gone directly against advice it was given by outside consultants in the Miller-Shaw Commission report of 2010.  

Quoting from the report: “Adopting any form of income or payroll tax would remove much of the fiscal allure that has boosted the economy. Any form of income or payroll taxation would require the imposition of an entirely new tax system with both high set up costs and potentially significant and permanent compliance costs.  

“It is also unlikely that a tax on income, regardless of form, would solve the problem of variation in revenue collections.”  

Mr. McLaughlin said he viewed it as “nigh on impossible” that the government would be able to implement the payroll tax by the end of August, as has been proposed.  

 

On-line protest  

The Caymanian Compass website, www.cayCompass.com was abuzz with opinions about the proposed payroll tax on Wednesday and Thursday.  

The vast majority of the comments were not supportive of Mr. Bush’s proposal.  

“The expat tax or community enhancement fee (which, for the avoidance of doubt, wouldn’t apply to me) wouldn’t benefit Cayman, or Caymanians,” said website commenter ‘Lex’. “To the contrary it would likely cause irreparable damage to the Cayman economy” 

In some way you have to laugh at this idiot and his reasons behind it,” another commenter opined. “How illegal can this be? I propose all ex-pats on the island STRIKE for a week.”  

About 24 hours after Premier Bush made his broadcast address about the payroll tax, a Facebook page called “Caymanians and expats united against taxation” was created and had 1,500 people sign up as group members within three hours.  

Local social media marketing manager Nick Pitman started the page, stating the issue was about a proposed tax he called “discriminatory”.  

“We hope you will wake up and see that you are killing Caymanian businesses more with this proposal, more empty houses Caymanians cannot rent,” Mr. Pitman wrote in one of his posts on the site.  

Other page commenters stated their views: “I think this will seriously damage the nation’s economy. I have been seriously planning to move back there and invest in the Islands again. Now, I don’t know what to think.”  

Another commenter noted: “This tax idea is idiotic, ill-timed and short-sighted.”  

By press time Thursday the Facebook page had more than 4,000 members. 

Governor asks ‘Where is the budget?’  

The following statement was released by Cayman Islands Governor Duncan Taylor’s Office Thursday: “I have seen reports of a statement issued by the Honourable Premier on the budget yesterday. I think it would be helpful to clarify that negotiations on the budget with the Foreign and Commonwealth Office are ongoing: we do not yet have an agreed budget.  

“The FCO’s Economic Advisor sent to the Cayman Islands by the Minister for the Overseas Territories, Henry Bellingham, to work with the Cayman Islands Government on the budget has returned to London but remains fully engaged in the process.  

“He has set out to the Cayman Islands Government the broad framework for a sustainable and credible budget. He would need to see a draft budget which fits that framework before he could recommend to Minister Bellingham that he approve it.  

“He has made clear that he would expect the Cayman Islands Government to achieve this through a combination of expenditure savings and measures to raise revenue: the “precise nature of these is largely a matter for the Cayman Islands Government but they must be credible and sustainable.  

“At this time, the Economic Advisor is still awaiting detailed proposals on the budget from the Cayman Islands Government.” 

FB protest group

This Facebook group was created late Wednesday to address the proposed expat payroll tax.
Brent Fuller
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26 COMMENTS

  1. I’m interested in what all these people who are so venomously against paying tax have to offer as an alternative solution? Let’s be honest, Cayman’s days and the days of Tax Havens like them are slowly going to be numbered..time for plan B. I’d suggest infrastructure spending leading to building a eco tourism economy. Caymanians seem to long for the days when the world was suiting their agenda, the games changed and new ideas need to come out of this or the place will be toast. A sad former resident.

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  2. this will not kill our islands nor will the taxes on native Caymanians when the time comes but it sure will get tougher to live though but welcome to life mon!!.remember a vast majority of expats here are not truly loyal or committed to these islands they are here soley for persoal finiancial gain.A lot of expats are talking about leaving or going on strike all I have to say is GO FOR IT!! we Caymanians do not have that luxury even when we start getting taxed we will STAY BEAR THE BURDEN OF HARDSHIP SACRIFICE that will be needed to keep Cayman strong,and we will overcome just like are Forefathers did who we Caymanians rightfully credit for helping to make Cayman what it is today.This recognition of our Forefathers is RARELY acknowledged by a VAST MAJORITY of Expats which just proves that they are ungrateful for ALL that these Great Islands have Provided for them their famalies. So to all the Ungrateful / Prejudiced / narrowminded Expats I say go ahead leave I am sure the Bahamas Burmuda will take you allow you to do in their countries what you are have been doing here In the Cayman Islands ( Ha Ha )And to all this talk about going on strike I challenge you all please go ahead do it I beg you PLEASE DO IT !! I would LOVE to take some pictures to show my future grand children share with them the early days of the CAYMAN ISLANDS REVOLUTION when the Expats tried to rule the day but we CAYAMNIANS OVERCAME!! lots more to say but why really ? because since we CAYMANIANS are out numbered well over a hundred to one I know most of the replys will be against what I say here to ALL the expats who have TRULY opened up their HEARTS made CAYMAN there HOME are MORE THAN WILLING TO STICK THIS OUT WELCOME TO OUR BEAUTIFUL VERY BLESSED PARADISE IN THE SUN HOME THE CAYMAN ISLANDS THANK YOU FOR REMAING FAITHFUL TRUE TO OUR NATION thru these VERY DIFFICULT CHALLENGING TIMES to the rest of the expats who are whinning crying foul well leave be at PEACE MON !! THE CAYMAN ISLANDS WILL SURVIVE PROSPER WITHOUT YOU !!!
    oh yeah hey DOODLES I TINK ME GRAMMER IS GETTING A LITTLE GOODER DONT U TINK MON BY THE WAY U STILL NEED HELP PACKING YOUR BAGS ILL EVEN BUY U LUNCH AT A TRADITIONAL CAYMANIAN SHOP !!!

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  3. Cayman has a debt to GDP ratio of about 25%…. relatively low considering Japan is near 200% and the US is 105%. Moody’s gives Cayman a Aa3 rating (investment grade), so why cant they sell sovereign bonds or sell savings bonds to residence??? Canada has Canadian savings bonds backed 100% by the government. It is a super easy product to sell and teaches young people (and old) to save and can be bought with deductions from payroll. We are basically lending the government money and getting paid for it.. win/win!! instead of them taking it… lose/lose

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  4. The problem with politicians and governments the world over is that there is never enough money. Do not think this direct taxation is the end it is the beginning only.
    I am truly disappointed in McKeeva as I never thought he would be the one to introduce direct taxation.

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  5. The payment or non payment of this proposed 10% tax will not kill Cayman. Although I believe the Premier should have implemented 10% payroll tax across the board, something needed to be done. If you believe there are rude comments made on this forum about our Premiere, you should look at some of the blogs on President Obama. They have him plastered with donkey ears, big drooping lips, a mockery.. The expat lobby is very vocal here in Cayman and well condition in their coined one liners, to undermine and intimidate.

    As far as those waiting for Cayman to die, remember we made this platform on which you jumped on for what ever reason.. Instead of wishing to sink the good ship Cayman, we need to balance or lighten the load..

    Cayman Government has been struggling for years to keep in the black, it was the sacrifice of our forefathers/mothers with sweat and tears they built our infrastructure which the government sells to maintain service to all to include expats..

    While the majority of these so called lovers of Cayman wallow in the tax free haven, they never give up the option to go home to their tax burden homeland, where they protest just as loud if one cent in their defense budget is cut.

    For lack of trust, with dual fingers they sit over nuclear triggers that would see us all destroyed..

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  6. Like any business, and life, you have to live within your means. This is something this government does not understand. It’s sad that the government would rather damage the country than adjust it’s own structure.

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  7. Hey Indigenous yes your gamer is getting a bit better it says a lot for the public education on the island, And thanks for the offer to lunch but I will not be going anywhere, I will be staying to enjoy the beautiful lands of the Cayman Islands with my family that are Caymanian and have been here since the beginning of the first settlers. The history books tell the whole story maybe you should read it one day. I know all the stories form the times it was hard and a lot of Caymanians left the island it see work and went to sea or the USA and they sent there money back to support their families just like some of the expats do. Some eventually came back home but a lot more left for a better life in the USA as it was better for them all financially. I know of some families that have since returned to there beautiful home of the Cayman islands due to the fact that the economy got stronger here with the help of expats knowledge and experience and they could live just as comfortable here as they could in the USA. Expats love these Islands why do you think they stay and help the islands to prosper

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  8. Back in Sept.2009 I suggested to the Premier the issuance of bonds to finance cheaper government debt. I had suggested to oblige residents, especially the ones which do by not living here not really support the economy, to purchase such bonds. Furthermore all investment funds registered here could be held to invest a certain amount in such bonds as well.
    Cayman did come out with a bond issue but it was sold to the regular market were it had to pay of course a much higher interest rate apart from large expenses for marketing, brokers etc. I never heard anything back on my suggestion. Cayman should try other ways to finance its budget and not make this desperate move in the wrong direction.

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  9. Great idea, crisscross! Savings bonds would definitely be an attractive alternative to direct taxation–especially if the Community Enhancement Fee (a.k.a. expat payroll tax) involves eliminating the currently mandatory pension contribution.

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  10. 99% of the talk of leaving is just that, talk. They know deep down that Cayman will still be better than every other country in the world.

    If the shoe was on the other foot, if the tax were to be applied to Caymanians only, the expats would only shrug their shoulders and continue on their merry way, sending their dollars off island to fatten up their bank accounts overseas. Where is better than Cayman for expats even after the tax? Bermuda, think not. Bahamas, definitely not. Here they can outright own property, buy 2 and 3 cars and enjoy a very high quality of life albeit at a high cost but in the end, they know its worth it.

    I think Caymanians should be taxed as well just to be fair. No one likes to make the hard decisions but someone has to do it. All the opposition is doing is rubbing their hands together, knowing this is helping their chances of getting in next year.

    Instead of expats hiring their buddies, hire young college educated Caymanians. If this tax increases the value of Caymanians in the labor market, then do it. Some expats would have you believe that all Caymanians are lazy and will do only office work but the real reason is that they have a buddy lined up for a job.

    And dont give me a BS response about needing experience. Yes it helps but usually is not neccessary except for senior or management positions. Alot of expats with experience still have to trained on the job for weeks before they actually take responsibility for a position. Why cant they hire a young college educated Caymanian for the position then. Like I said, the buddy system.

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  11. Indigenous – firstly, have you ever experienced a different culture? and Miami shopping malls do not count. Secondly, take a look at the ‘M’ key, look a couple keys to the right, that is a full-stop, or period, please learn how to use one – it took me about 10mins to read your opinions.

    Caymanian-on-guard – regarding the offensive images etc. about Obama, do you think he is bothered? do you think it is unexpected? What do you think he might do, perhaps ban journalists from covering discussions in the Senate? Take false Twitter accounts seriously? Politicians are there to be lampooned, they are human, and make mistakes in the glaring public view. Let’s face it, Bush and the opposition all have plenty of foibles that would amuse most people. If we didn’t poke fun at them due to fear, then what would we have?

    I also think the Govt should go on an all-expenses paid trip to Spain, Ireland, Italy and Greece to see how to handle debt.

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  12. Beenie – I am probably what you call on an average wage and I certainly can not afford 2-3 cars or a house. I have no money at the end of each month and certainly do not send any money home. My husband is a waiter in a very popular restaurant on the island and it will hit people like him the most. He works 10-12 hour days 6 days a week. There is not one Caymanian working in that restaurant. And it is not because the owner or staff hires his/her ‘buddies’. It is because no Caymanian ever applies for a waiters job.

    In my work place experienced Caymanians are always hired and we also take on Caymanian graduates. I think you are making a very broad assumption that ‘us expats’ only hire ‘our buddies’. It is just not fair for you to say that.

    I think the same as you that if you are introducing a tax then it should be for everyone BUT there should be tax brackets for the different salary levels. That way it would be much fairer.

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  13. This comment is just a general statement in regards Caymanians thinking expats aren’t going to leave.

    If you factor in the very high cost of living, the 22% duty, and then add on this 10% tax, there is no incentive to say here. Yes, I know you will say but there are taxes everywhere, of which you would be right. However, factoring in that cost of living is about 40% higher and with the addition of this tax an extra 10%, there would be no reason for me staying.

    I know you say, well go then. Trust me, I am not the only one who will go, and you will see a domino effect you have never seen in Cayman and will be irreversible. It isn’t about the 10%, it is about 10% (tax), 22% duty, and cost of living being about 40% higher that combines makes Cayman infeasible for any middle class person.

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  14. Why, Why, Why, can’t the people here see? It is so obvious. Forget about expats vs. Caymanians for a second. Just focus on the issue. Collecting more money is just perpetuating the problem. Throwing gas on a fire. Don’t let a government that doesn’t know how to budget collect more revenue! If you let this government start collecting direct tax revenue, it would be like selling a gas station to an arsonist. Mark these words government expediture next 5 years year will grow like a monster. The civil service will grow, unnecessary contributions will grow, piles of new capital projects will be announced and more refridgerators will be delivered before the elections than ever. It’s not free; it has to be paid for. Figure it out. Put your foot down once and for all. Kick out people running for office who cannot add and subtract. Put forward and elect people who understand how to spend within their means.

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  15. Just an observation: When the work permit fee increases were introduced in 2010, Cayman lost nearly 10,000 people in a matter of weeks! People left in mass exodus, in which Cayman is still feeling the effects today. Houses remain unsold, rentals remain un-rented, businesses closed and are still closing. Thousands uniting against this in a matter of hours on worldwide media would suggest possibly the same effect?? My suggestion, learn from past mistakes.

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  16. I cannot express enough my utmost disappointment to hear that the expat population is considering a boycott of all local businesses next week. I fully believe in freedom of speech, and peaceful protests, but a boycott to put more pressure on the small business is outright wrong. It is not the local businesses that are imposing this tax upon the expats, but the government who have overspent. Don’t crucify the little guy as this will do nothing more than divide the locals against the expats as they are setting it up that way. For the record, I am against this tax and for that matter any tax but any protest must be handled properly.

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  17. If this does get implemented, I would simply like to see the regulations and proposed framework for it, beforehand.
    My suggestion is to regulate each business to pay the funds directly to government, this would cut costs. But the government needs to safeguard that the employees aren’t taken advantage of. That’s an option that could be taken. Kind of the same work that they do for health insurance, registration fees, and so on.

    Secondly our Govt, needs to revisit the services for the Civil Servants and dependants of the country, so as to make sure that the services aren’t taken advantage of like they previously were. I’m not sure if they still are. Examples are the healthcare and Social Services. This way they can redirect the services efficiently, and help remove unnecessary stress on these Services.

    If this proposed tax is truly a Community Enhancement Fee, we all can agree, that we will need to see what projects will be covered and which ones are in the pipeline. We will need more transparency from our Govt, not just finding out about it in the News. (No pun intended) Proper bulletins and notifications for the public should be standard.

    Lastly, please keep in mind that our current Govt inherited a deficit from the previous body, and they must meet the UK’s standards as we always have in the past. If we must be taxed, so be it. I’ll gladly do it for my country, the place I call home needs some house keeping. I do however need to know, where, why (Besides to meet the budget requirements), and how these funds will be spent and saved, now that my salary is directly in play. This should however go for everyone that residences here. Average Joe to Rich Joe, to MLA Joe. No exemptions. If this rule is followed, the taxation term would probably be shorter, because it would minimize the percentage needed to stabilize our economy, and it opens us up to a vast contribution pool.

    Just a thought.

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  18. SoufendSally,

    I definitely understand where you are coming from. Not all expats are rolling in money and in fact are living hand to mouth just like some Caymanians, myself included. I also agree that we should raise the tax to limit it to people who make over 50K a year.

    What I do believe in is that a buddy system does exist in some businesses in Cayman. Case in point, a senior manager or business owner is Scottish for example and every other position downward is filled with a Scot. Seriously, that’s more than coincidence.

    Nothing against Scots as most of them that I know are very amicable people.

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  19. The LEAST expensive way of balancing a budget is by cutting expenditures.

    The most sustainable government financial system is one that limits expenditures.

    As just one example, something like 20 million plus is going to be spent this year as subsidies for the Turtle Farm and Cayman Airways. This has been going on for years with no end in sight. We cannot afford this.

    Cut the waste and the fat in government funding whether it is in the form of a slush fund, luxury travel, personal servants or otherwise.

    Introducing new forms of taxation REQUIRES that government puts in place expensive systems for collection.

    Income tax and VAT are two of the most expensive forms of tax to implement. Either of them will cost millions or tens of millions to implement which will negate the revenue that might be raised.

    VAT also discourages local production because it becomes taxed. Import taxes/duties only tax foreign production.

    We should cut every possible expenditure before we even think of raising new taxes.

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  20. Mr. McLaughlin, a payroll tax is not the same as income tax. And it is certainly not the worst option. In fact it is definitely preferable to property tax, VAT and sales tax for a number of reasons. Our key competitors BVI and Bermuda both have payroll taxes and at higher rates (14%).

    While I think it is unfortunate that the government has deferred dealing with the issue until it has become a crisis, it is what it is and we must find the best way to raise the necessary revenue.

    I don’t agree with this being borne by expats only. I think that can only lead to greater social division (which government said it was keen to avoid in its opposition to OMOV). I suggest a 5% payroll tax (3% employers, 2% employees) to be borne by both Caymanian and non-Caymanian workers. It is much more palatable for everyone (subject to a theshold) to be faced with a 2% reduction in pay than for expats alone to be faced with a 5% cut. I think the revenue generated will be much the same since there are more expat workers below the 20,000 p.a.threshold than Caymanians.

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  21. Wow… the millions they spent in the UK on that horribly boring, un-intertaining and dissapointing Olympic opening ceremony should have been given to Cayman… halve the problem would have been solved.

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  22. Look’s like the government of the day wants to turn communist, but don’t know how to go about it. This a good start I hardly agree with anything mr bush does but I’ll like to shake his hand on this one. He took my idea serious this time only the tax should be for all expatts every tom dick and harry contracted officers,expatt civil servants too reguardless of how much money they make.Most of the money will proberly go back on policeing the system anyway. Let’s see how many of them we can catch for tax evasion that’ll be fun. Hopefully this whole think wont back fire on us and the Caymanians will have to pay tax too. MAC while you at it take a salary cut yourself to help with the budget and give something to social service to help all those unemployed mothers and fathers. o and one more thing all you foreign work force I hear say you planing a big boycott unna go head we na business, In fact some of us would enjoy that.I wish the best but I couldn’t careless. SHAME on all you companies that hire expatt labour for selfish reason.

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