Expat tax threshold is $36,000

McKeeva Bush WB meeting main

The income level on which the proposed 10 per cent expat tax will be levied will be $36,000, according to Premier McKeeva Bush.

At a public meeting in West Bay Wednesday night, Mr. Bush said the tax would be implemented by 1 September and would administered by the Immigration Department. The premier had earlier said the tax would apply to those earning $20,000 and more.

“The employee on a work permit will make a contribution to the fee, which will be calculated at 10 per cent of the employee’s remuneration,” Mr. Bush said.

Government Minister Rolston Anglin said the 10 per cent tax would apply to a “wide definition” of salaries and would include bonuses and other compensation.

The premier told the packed room at the Sir John A. Cumber school hall that mandatory requirements for work permit holders and their employers to contribute to pensions would be eliminated. Currently, all private sector workers, Caymanian and expat, pay 5 per cent of their salaries into their pension, which is matched by a 
5 per cent contribution by the employer.

No separate income tax department would be established to collect the tax. The Immigration Department would collect, administer, audit and enforce the new tax, as the department already collects work permit fees and has a database containing details of all work permit holders in Cayman, Mr. Bush said.

The tax, which Mr. Bush calls a Community Enhancement Fee, will not apply to non-Caymanian permanent residents or to non-Caymanian government employees, the premier clarified. Expat spouses of Caymanians will also be exempt from the tax.

Also, Mr. Bush said those being charged the tax would not be given a “discount” on the fee. In other words, there someone making $35,999 a year would pay no tax, but someone making $36,000 a year would pay the full 10 per cent levy on their entire salary.

Annual tax revenue  

According to the 2010 Census Report, there are approximately 5,875 expatriate workers with salaries over $36,000 per year. If expatriate civil service workers with salaries above $36,000 are excluded, the number of expats subject to the tax declines to about 5,250, according to the Civil Service Annual HR Report for 2010/11.

When averaging the salary brackets, analysed in the Census Report, the payroll tax would collect about $37.1 million. However, the actual number will be smaller as permanent residents still have to be excluded. The true number of people subject to the tax will thus be closer to 4,000-4,500 and government must also deduct collection costs. Government is therefore likely to collect $30 million or less from the tax.

‘Sun your buns, governor’ 

The premier said the government’s stymied efforts to divest the Water Authority was one of the reasons introducing the new tax was necessary if Cayman was to meet the United Kingdom’s requirement to have a sustainable budget.

“We got agreement from the United Kingdom to divest these entities, such as the Water Authority and sewerage. Had we been able to do that, because they said pay the money and pay… down the debt, if this country get behind the government and we can make the divestment, you won’t have to do this kind of revenue raising measures.

“What the people should be… blogging is say ‘Governor, stay on the beach, sun your buns and let the government get on with its work. Then we would not have any need to tax anybody, because that’s what the United Kingdom has agreed.”

However, when a member of the audience later questioned whether the proposed income tax would be scrapped if the Water Authority was divested, Minister Anglin responded that he could not say if that would “alone cause government to be able to move completely away” from the tax, but said it would have a “direct benefit” on it.

New 5 per cent fee 

Mr. Bush also referred to an additional 5 per cent fee that would be imposed on companies hiring certain categories of employees. “This will serve as a further incentive to train and recruit Caymanians in those roles,” Mr. Bush said.

Government Minister Rolston Anglin told the Caymanian Compass that the 5 per cent fee would apply to the types of entry level positions and unskilled labour jobs in which a work permit holder was unlikely to get key employee status. Whether this fee would be an income tax, a further work permit fee or other charge was still being worked out and had not been finalised, he said.

 

Heated Q&A 

After more than an hour and a half of speaking and showing slides about the government’s finances, Mr. Bush took questions from the floor. During the Q&A session, several people who opposed the tax were heckled loudly by other members of the audience. In response to one question, Mr. Bush said he was “not going to put any tax that hits the ordinary Caymanian any harder than they are now”.

Asked what other avenues the government had considered before implementing the tax, Mr. Bush said that the government had looked at many alternatives, including “gaming, lotteries, service fees, more garbage fees, car fees, luxury car fees, [and] work permit fees”.

At one point, Mr. Bush referred to one female Caymanian questioner as “little girl” and told her to hand back the microphone after she suggested the tax should be applied to everyone. She asked how Cayman could sustain itself if, as she said, Mr. Bush had said in his speech “Cayman came out from under the UK”. Mr. Bush denied making that comment.

After one exchange between audience members got particularly heated, Mr. Bush cautioned members of the audience to “be careful how you ask your questions… State your piece, because there are people who will retaliate about what you will say. We’re not here for a fight, we’re here to answer questions as best we can. Let’s not turn this into an us and them.”
Mr. Bush said he would listen to recommendations for raising revenue and asked people to submit suggestions to the Premier’s Office as soon as possible.

“This Community Enhancement Fee is not a desirable first option but we are being required to come up with additional sustainable revenue sources,” he said.

He added: “If we can get an alternative that meets the revenue that the United Kingdom say we must meet, then we have no problem but to make necessary changes that will create less of an impact on work permit holders.”

Former Cayman 27 reporter and political candidate Kenneth Bryan called for calm and pleaded with people to “keep the passion down and try not to go too far because it can cause the country a lot of pain”.

Lawyer Steve McField hit out at derogatory online comments made about the premier and government members and asked for more respect to be shown to Cayman’s leaders.

One Caymanian member of the audience asked how a Caymanian could sit next to a non-Caymanian doing the same job and “feel fine about that person paying taxes for your benefit”.

Several attendees shouted “Yes!”, to which the speaker responded: “I wouldn’t.”

The speaker later added that the tax should be applied across the board and not just to expatriates to pay for the expenditure of the Cayman Islands.

Minister Anglin, responding to the question, said he had worked as an expat in New York and had paid tax there and “I’ve never been able to vote in the United States”.

He added that he had sat next to colleagues in New York while on a work visa that mandated he be rolled over after three years.

Another questioner said he was concerned about the financial impact that the reduced investment power of pension plans, once pension revenue is withdrawn from those plans, would eventually have on the “poorest of Caymanians”.

He asked if expats would be able to withdraw their pensions and transfer those funds to another pension plan of their choice.

Mr. Anglin said the matter would be “taken under consideration”.

Caymanian Compass reporters Michael Klein and Brent Fuller contributed to this story.

McKeeva Bush at West Bay meeting

Premier McKeeva Bush addresses a packed audience at Sir John A. Cumber Primary School hall. – PHOTO: MICHAEL KLEIN

West Bay tax meeting 1

‘Jordanian ambassador’ Amjed Zureigat speaks out at Wednesday’s meeting as government members talk things over amongst themselves.- Photo: Brent Fuller

25 COMMENTS

  1. There is no roll over in the US. The tax thing I agree, but should be applied to everyone, if not I and a lot of my camaynian friends agree. Have a beautifull day. Full moon today, be carefull.

  2. Sun your buns, governor a quote from Premier McKeeva Bush.

    Classic/Classy, haha.

    Generations from now kids will be reading in history books this fantastic quote.

  3. Disturbing to see such a beautiful nation and beautiful economy come apart at the seams all at the hands of a few!

    Mr. Bush this will be your legacy for better or worse, it will be on your watch!

    Good Luck.

  4. The true number of people subject to the tax will thus be closer to 4,000-4,500 and government must also deduct collection costs. Government is therefore likely to collect 30 million or less from the tax.

    All this financial damage to investor confidence, loss of Real Estate Stamp Duty, Import duties, Work permit fees revenue when more people leave the island, true figure that will be collected more like Zero or worse.

  5. This is a sad day. This is all about division and votes.
    Minister Anglin, responding to the question, said he had worked as an expat in New York and had paid tax there and I’ve never been able to vote in the United States.
    He added that he had sat next to colleagues in New York while on a work visa that mandated he be rolled over after three years.
    I believe Mr Anglin also stated that he had factored the tax issue and roll over into into his decision to go there. How about if Mr Anglin had gone there on his three year deal, he had budgeted his expenses at home and factored all this into his budget and decision and then 1 year into the three year term he was called into the managers office and was told. Mr Anglin. By the way, you are going to be taxed an additional 10% of your salary, this will start next week, and you will be the only one in the office to take the 10% reduction. Mr Angline asked why and he was told, it is because your from Cayman, based on this you will be the only one taxed in the office. Wonder what would his reaction would be? Would he deem this fair? Would he think that maybe this could be a form of descrimantion based on his ethnic origin? How would he feel? How would US, EEC, UK or Canadian law consider this action?
    Expats may not have votes, but they can make contribution to political parties. Perhaps this may be a way for the expat community to gain some representation in Cayman?, a couple of hundred bucks for Mr Miller and the PPM does not sound to bad. Maybe the 5000ppl affected could put in 200 each 5000pl x 200 = 100,000, could be a nice war chest for the PPM and Mr Miller?
    This siutation is crying out for unity, common sense and togertheness, its a tough situation and ALL of Cayman needs to rally together to try and fix this situation. It needs leadership not division and finger pointing and knee jerk reactions.

  6. OK, this tax will affect the big earners in a small way, maybe one less shopping trip to Miami, a cheaper destination for the winter ski trip? I do not feel sorry for these people and I don’t think it will affect their income enough to leave. The ex-pats who as of now earn a comfortable living say at 35,000-50,000 per year, I am talking about the Brits, Americans, Canadians, South Africans, Europeans. These people do not send their money home. They rent property or buy a condo they live comfortably in paradise and spend their money in the restaurants and bars, at the sports clubs and local shops/salons. It is their disposable income that will be lost, the reason to enjoy life and live here in Cayman. These people may stay after taxation but they will not be spending money in the community anymore, they will spend it on essentials like schooling and rising utilities. Their children may not have swimming lessons anymore or do Ballet. The charities will receive less help and donations, residents will do more paid work instead of volunteering. This is just the tip of the iceberg!
    Who owns the bars and restaurants, the beauty salons and spas, the swim and dance schools? Caymanians! This tax will affect them more than anyone else and I can’t for the life of me understand why some of them do not see that or allow it to happen.

  7. If everyone pays a little flat fee per month we can raise 16,369,500 per year..

    Expats pay 50 per mth
    Caymanians/Status Holders pay 25 per mth

    Work Permit Holders 19,298 x 50 x 12 =11,578,800.00
    Caymanians/Status Holders 15,969 x 25 x 12 =4,790,700.00
    Total 16,369,500.00

    *I did not have any data on Permanent Residence (without the right to work) but obviously they can add a little to the total.

    paying only 50, and 25 we can honestly accurately refer to this as a: Community Enhancement Fee

  8. My wife and I have decided to move to the Caymans because of the tax structure. The imposition of a levy on ex-pats discourages growth on the island. The unintended consequences will include a negative effect on growth of real estate sales.

  9. NewRes, Correct me if I’m wrong but if the poll of tax paying expats is around 4500, this means that the government would need to collect an average of about 11,000 each to meet its mark. That’s a huge chuck of someone’s budget especially with no kind of exemptions. I wonder what we be next when more money is needed.

  10. Always disconcerting that the law makers who are implementing a tax are also exempt from paying it. Rather feels like the lord of the manor.
    Could the Compass find out whether the Governor, who will rubber stamp this disaster for the Cayman economy,will be paying his dues as an expat worker?

  11. Caymanians, do expect to be also taxed within a few years and protect yourself now for it. The expected revenues for this new law will be about 30 millions which is nothing for any Governments. They can spend this money in their sleep. Do not agree to this new law unless you are protected from any taxes for at least 10 years.

  12. IslandBoz, what you suggest sounds like it would be a well-balanced solution and would have minimal impact to people even if the fee you mentioned was doubled or tripled. The problem is it would require everyone contributing and one of the big arguments is who should be paying and who shouldn’t have to..

    I’d be willing to contribute to something you mention and I not even an Expat, Caymanian or Status Holder. Something is needed but I don’t think it’s right to put the Burdon on one group of people. If one person can’t contribute as much as another it doesn’t matter as long as he or she has the chance to be part of the solution.

  13. THIS tax thing could be made simpler,space and jobs for Caymanians across the board. Tax the low income expatts too. SO maybe some of them would leave and a Caymanian could get the job. NOW will also be a good time for a minimum wage. WHAT is there to stop the employer from paying less than the job is worth to avoid tax. MAKE the tax more full proof and sure or a lot more people will be getting permanent residents and residency along with getting married to Caymanians..

  14. I agree with Teacher and Teddy for the most part. There are key issues which are getting lost in the heat of the debate (the heat being caused by such an unjust and irrational method of budget balancing). First off, the issue is not so much revenue raising but budget balancing. Spend is going through the roof. Give the same people who can’t handle their finances more money and it doesn’t deal with the inherent problem of their inability to spend wisely in the areas that need capital the most in a sustainable manner.
    If tax is required then apply it evenly, with those most able to afford it bearing the burden.
    The divide that this will cause in the workplace is very worrying. The local Cayman people are the nicest I have met. Creating any sort of animosity between locals and expats is a terrible idea.
    Bear in mind that expats live it up here and don’t tend to save huge amounts of money. The very last of their spend is on discretionary items like meals out, drinks, luxury items, clothes etc in Cayman shops. This will be the first thing to go. The knock on effect is lower wages for local staff in these jobs.
    Finally, the desire to driving expats off the island, which thankfully is very much a minority view, will bring the businesses with them so it will not result in more jobs for locals but the opposite. This also means that the budget deficit will need to be plugged by taxes from the locals (which has already been well established in this forum and others).
    Careful what we wish for here. Paradise can last forever. This move will ruin it.

  15. So 4500 non Caymanians are now responsible for the Cayman debt, Find that a bit hard to understand. Still good news told my landlord if the ‘income tax’ comes in I need a rent reduction – he agreed on 250. Ironic he’s Caymanian!

  16. Ineptocracy: A system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

  17. Tax is just a method to take away freedom. With the wave of a hand the accused tax evader will be taken to jail,and there assets siezed.
    This Is what they do in the US.
    People are put in jail for tax evasion not the actual crime.

  18. Don’t need this tax if you stop spending so much money. Don’t have to fire civil servants, just stop blowing so much money on useless wasteful stuff. Why is the new budget 10% higher than last year? Just hold the line on spending for a while and let the economy catch up!

  19. I nominate Mr Bush for the Unspeakable Prize for the most unstatesmanlike not to say stupid statement of the year.
    He should also ponder what his buns would look like if revealed.

  20. I fell in love with Cayman a few years ago and now rent a condo here as a second home while looking for a place to buy. The government has become increasing worrysome and I think I now have to face the fact that I need to look elsewhere for some place to call my second home. This latest expat tax was the last straw for me. I’ll learn to love someplace else. Goodby Cayman 🙁

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