‘Discrimination’ claimed by payroll tax opponents

HRC says tax OK, OECD not so sure

The announcement that a 10 per cent payroll tax would be levied on Cayman Islands work permit holders who earn more than $20,000 per year has led to repeated cries of tax discrimination over 
the past several days.  

“This opens the door for a possible lawsuit for discrimination if you ask me,” one cayCompass.com website commenter opined.  

“Either no one pays tax or all pay tax! No discrimination!” Another wrote on Wednesday, shortly after the Compass reported the payroll tax proposal made by Cayman Islands Premier McKeeva Bush.  

A Facebook page dubbed “Caymanians and expats united against taxation” claimed it was started as “a reaction to the latest ignorant and discriminatory policy from the current administration”. The group had nearly 10,000 people sign up as members by Saturday.  

The imposition of the payroll tax, as proposed by Mr. Bush, would only apply to work permit holders. Caymanians and status holders would not be affected. However, the Cayman Islands Human Rights Commission confirmed Friday that such a limited payroll tax would fall within the country’s acceptable standards, even when the new Bill of Rights from the country’s 2009 Constitution Order comes into effect in November.  

According to a brief statement issued by the commission: “Section 16(4)(a) of the Bill of Rights, Freedoms and Responsibilities (Non-discrimination) exempts (or carves out) government tax from this. The HRC is still researching this to see if there might be any other breach but our initial thoughts are that the government’s budget proposal does not breach the Cayman Islands Bill of Rights, Freedoms and Responsibilities.”  

As the committee statement acknowledged, that is likely not the end of the matter.  

A report issued in February 2010 by the organisation that represents the Cayman Islands financial services industry, Cayman Finance, commented on the issue of discriminatory taxation.  

“Over the last 10 years, the governments of the large economies have been imposing their view of how a tax system should operate on the rest of the world,” the report, written by Bournemouth University Senior Lecturer Richard Teather, read. An example of this, Mr. Teather wrote, was the Organisation for Economic Cooperation and Development’s ‘Harmful Tax Practices Initiative’ as well as the European Union’s code of conduct for 
business taxation.  

“A fundamental principle of these initiatives is non-discrimination,” Mr. Teather said. “If you have a tax, it must apply to everyone.”  

The report from Mr. Teather mainly focused on the effects of direct taxation and how it would affect the Cayman Islands economy as a whole.  

The Organisation for Economic Cooperation and Development’s tax convention does address non-discrimination with regard to taxation issues, although its recommended protections are by no means absolute.  

Rather, a discussion on the non-discrimination clause in article 24 of the tax convention states that it seeks to “balance the need to prevent unjustified discrimination with the need to take account of legitimate distinctions” for taxing purposes.  

The opening paragraph of the non-discrimination section states the general principle that “for purposes of taxation, discrimination on the grounds of nationality is forbidden”. However, a key factor in the non-discrimination clause is whether the taxpayer is considered legally resident.  

“The underlying question is whether two persons who are residents of the same state are being treated differently solely by reason of having a different nationality,” the OECD discussion paper on its tax convention states. “A taxpayer who is a resident of a contracting state and one who is not a resident of that state are not in the same circumstances.”  

Some Caribbean jurisdictions do levy separate taxes on ‘snowbirds’, or individuals who stay in their jurisdictions for only a part of the year. Cayman Islands immigration law makes several distinctions between individuals with ‘permanent residence’ and those who are considered ‘guest workers’ – i.e., work permit holders and government contract workers.  

 

10 per cent of what?   

Another issue that remained unclear at press time Sunday, was precisely what part of an expatriate worker’s income would be subjected to the proposed 10 per cent tax if it did take effect.  

If the 10 per cent tax was applied to all workers earning more than $20,000 a year, presumably a person earning $50,000 and paying a 10 per cent payroll tax would have to give the government $5,000 per year.  

However, in some other countries that apply a payroll tax to businesses, that first $20,000 minimum earning would be subtracted from the total yearly amount.  

Meaning the same individual who earned $50,000 per year would only have to pay tax on earnings above $20,000 – 
in their case $30,000 per year.  

That means the tax for that person would only be $3,000 per year.  

Requests to government for clarification on this aspect of the payroll tax proposal had not been answered by press time.  

Richard Teather

Mr. Teather
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17 COMMENTS

  1. Mr. Teather need to go sit down as he is only coming to the rescue of one of his alumni!
    The tax is constitutionally sound.,
    What is direct discrimination is hiring 35000 work permit holders sitting in jobs that Caymanians are duly qualified for and are denied.

    HRC need to come clean and defend Caymanians who are being discriminated in their own country being denied ther RIGHT TO WORK IN THEIR HOMELAND!

    Mr. Teather you’re not thinking about Caymanians, WE ARE.

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  2. The Bill of Rights will be interpreted on a basis that is consistent with the European Convention on Human Rights. While there is no legislative language to interpret at present, from the information that has been published it would be very surprising if the courts found that a tax that discriminates on the basis of possessing Caymanian status would be found to be non-discriminatory, proportionate and otherwise lawful.

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  3. Here we go again Liverpool, the usual trumpeting of Caymanians being denied the right to work is hardly the point here, but as usual its about all that you can bleat about.
    Don’t worry Sir, before long you will have the opportunity to look back on all of this,at leisure. In any other part of the developed world your comments, and the ones who share your views would be seen, and dealt with, as racist.

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  4. The community Enhancement Fee is Legal shall stay as such
    Once again I ask all the expats who are threating to leave due to this Legal Fee LEAVE.
    stop all this LEAVE watch Cayman dwindle away to nothing as a lot of you are saying, the only way to prove this is to LEAVE !!!
    so please just LEAVE

    I for one know that you are wrong in believing that Cayman will become nothing but a dust bowl once you all leave
    We CAYMANIANS WILL PROSPER without you here , but the only way for this to be proven is for you all to LEAVE SO PLEASE DO LEAVE !!!
    HAVE A NICE DAY !!

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  5. Has indigenous, and all the others who think this is a good idea, given any thought to who is going to be taxed AFTER the expats are all gone? Do you think they will take government’s need for tax dollars with them?

    This might be a good time to recall the words of a man named Martin Niemller:

    When the Nazis came for the communists,
    I remained silent;
    I was not a communist.

    When they locked up the social democrats,
    I remained silent;
    I was not a social democrat.

    When they came for the trade unionists,
    I did not speak out;
    I was not a trade unionist.

    When they came for the Jews,
    I remained silent;
    I wasn’t a Jew.

    When they came for me,
    there was no one left to speak out.

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  6. It’s interesting to note that, on balance, those reader comments in opposition to the tax are literate, grammatically correct and reasoned, while those in support are incoherent, illiterate rants.

    It lends some force to the theory that the real target of unemployed Caymanians’ resentment should be their own government and education system, rather than the people who are imported to do the jobs that Caymanians are not qualified for

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  7. @indigenous,
    You can have my job when I leave… you just need to go back to high school, then go to university, then spend 15 years in finance, and its all yours. Ohh and as a bonus you can also have my mortgage and fill my position volunteering at the red cross.

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  8. JTB

    The manufactured budget crisis has provided an opportunity for strategic political posturing on the part of some of our politicians. Among their objectives in my view, are the polarization of the population of these islands and the triggering of the venting of anger and venom, all so as to camouflage incompetence and political misdeeds. That is very unfortunate.

    That being said, I do not think that generalisations regarding the plight of any particular group help. I oppose the payroll tax, I am Caymanian, I am currently unemployed, and I would like to think that my posts display a knowledge of grammar equal to yours.

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  9. All the persons who harbour resentment to expats and are rejoicing that expats will be taxed and some will be leaving you are forgetting some things. In other words you are tunnel visioned and are burying your proverbial heads in the sand. Don’t you know that when the expats leave so do their money and some expats are employers who employ Caymanians? some are nurses, doctors, teachers who teach Caymanian children? Don’t you know that expats spend money on groceries and other services and this circulates throughout the economy via the Multiplier system to give employment to different sectors of the economy?
    So some of the jobs you are rejoicing about will be gone? Who will rent your apartments? who will buy your properties? My property is rented bay a Permit holder right now. When she goes will you rent my property. Don;t you know that the tax will eventually reach you too? You think the government can appropriate the expat properties give to you? Before being so selfish think of your future and the future of the children.

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  10. Jose P. I agree with every word you say. I am not for a moment suggesting either that all Caymanians support the tax proposal, or that all Caymanians are educationally deficient.

    I am suggesting that there is a community of trolls on this board who regularly demonstrate through their posts that they are effectively unemployable, but who blame their economic plight on the presence of expats, rather than laying the blame where it belongs with the corrupt and incompetent government system which relies on tame client groups to maintain itself in power.

    While I am a regular critic of the racism which is endemic on this board, I have never stated on here whether I am a Caymanian or an expat, because I think the distinction should be irrelevant. Sadly it is regularly stirred up and exploited for political gain by the egregious incompetents who make up the Government, and the useful idiots like Indigenous and Liverpool who lack the ability to understand when they are being used.

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  11. Couple of years government added 1% tax to send money to other countries. Now government want to add 10% tax on expat if they making 20000 ci a year. Which is a clearly 2000 ci a year taking out from expats savings account. So whats next, service tax, or value added tax. That makes cayman non tax free (For expats only) Thanks mr. Bush.

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  12. Discrimination you making me laugh man. EXpatts have been discriminated for years but most of all we the Caymanians just look at the pay.Some employers want to treat caymanians like how they treat the expatts that’s the problem talk about that mr DISCRIMINATION…

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  13. Mr indigenous consider this along with your Expats LEAVE wailing. The Expats have a choice to go or stay, whereas you DO NOT.

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