Businesses revolt!

Nearly every major business organisation in the Cayman Islands, including those run by the heads of several prominent local families, wrote or spoke to Premier McKeeva Bush on Friday about their views regarding the 10 per cent payroll tax for expatriates.  

Their message was certain: It must go.  

“Clearly, the proposed community enhancement fee has created polarity and division within our community, and this has caused us great concern,” read a statement signed by Woody Foster, Brigitte Kirkconnell-Shaughness, Roy McTaggart, Dan Scott, A.L. Thompson, Gene Thompson and Wilbur Thompson, 

“We are a welcoming, diverse society that recognises the contributions of Caymanians and expatriates alike and we are confident that the new revenue measures will provide a way to share equitably the responsibility of providing revenue to the government.” 

The merchant’s press release was sent out Saturday morning by David Legge, who stated that he had been “in constant contact with the Premier, who supports the 
content of the statement”. 

However, on Saturday afternoon, Mr. Bush – who was in Jamaica for that country’s 50th anniversary celebrations – had his press secretary, Charles Glidden, send out a statement indicating the matter was not yet decided. 

“The proposed Community Enhancement Fee will only be withdrawn if alternative revenue measures that do not affect the ordinary Caymanian can be implemented,” the statement said. “An announcement in this regard will be made on Monday night [6 August] at a public meeting at the Mary Miller Hall at 7:30.” 

Later Saturday evening, apparently unaware that Mr. Bush had issued a statement through his press secretary, Mr. Legge sent another statement reiterating that the prominent merchants were not mistaken in saying they been told the payroll tax was off the table as a possible revenue measure. 

“The business group disagrees that it has jumped the gun and is unable at this time to explain the discrepancy between the news reports and the clear understanding it has with the Premier, who approved – in writing – the [Saturday morning] press release before it was issued.” 

 

Mass objections  

Premier McKeeva Bush last month proposed the adoption of a 10 per cent payroll tax – referred to as a ‘community enhancement fee – for work permit holders earning at least $36,000 per year. Since that proposal was made public on 25 July, what could only be described as a massive public outcry over the proposal has not died down.  

On Friday, Cayman’s usually middle-of-the-road business community got on board with the protest, blasting the plan and offering other potential solutions to raise money for government.  

“The [Council of Associations] provided feedback and comment on the proposed 10 per cent community enhancement fee….All associations that have signed this letter oppose any move to a direct taxation system, which we agree in its current form is discriminatory and divisive to the social harmony that currently exists in the workplace,” read a lengthy statement sent out Friday and endorsed by the Cayman Islands Chamber of Commerce, Cayman Islands Bankers Association, Cayman Islands Compliance Association, Cayman Islands Fund Administrators Association, Cayman Islands Tourism Association, Cayman Contractors Association, Cayman Finance, Cayman Islands Insurance Association, Cayman Islands Real Estate Brokers Association, and Insurance Managers Association of Cayman. Local business owners, including Mr. Foster and Mr. McTaggart, met with Premier Bush Friday to discuss the situation. According to a statement sent out after the meeting, the business leaders and government had agreed to a compromise public sector 
revenue plan that did not include the 10 per cent payroll tax.  

“The Premier has committed to making a public statement on Monday night at the Mary Miller Hall agreeing to suggestions – proposed by us and others – and removing the community enhancement fee from further consideration,” the local business group stated. “At this time, he will provide details on the new revenue measures that Government is considering.  

“Our purpose is making this brief statement at this time is to help relieve the anxiety that presently exists within our community.” 

By press time Sunday, however, Premier McKeeva Bush’s office had made no direct comment regarding the statement from the local business owners, including whether a meeting would be held Monday. Repeated attempts to contact his office for comment on Friday and Saturday about the matter were met with a wall of silence.  

Whether the meeting referred to at Mary Miller Hall would proceed on Monday evening was unclear, partly due to the uncertainty over what path a tropical cyclone – Ernesto – would take through the Western Caribbean Sea late Monday or early Tuesday.  

Local business owners that spoke with Premier Bush Friday did not reveal what new revenue measures had been agreed. However, sources close to the matter mentioned increased work permit fees as on part of the proposal.  

The Cayman Islands Council of Associations, led by chairman Chris Duggan, weren’t as shy about talking over revenue-generating plans. In its statement sent to the premier Friday, the council supported “substantial privatisation” and government asset sales, reducing government operating expenses, maintaining a ‘contingency fund’ for government, using technology to save time and money within government, study ways of raising current revenue sources, increase the number of work permits held. “The associations believe that the following recommendations should be revisited and implemented as an integral part of any final budget strategy,” the association wrote.  

With regard to the government budget, the payroll tax’s elimination – if it does occur – would likely extend the time required for current negotiations with the United Kingdom government. As of Friday, Cayman was expecting to hear something back from the UK on Premier Bush’s $592 million spending plan by either Monday or Tuesday.  

However, administration officials acknowledged that another temporary budget might have to be approved if the proposal is delayed any further. By law, Cayman can extend a temporary spending up to four months from the start of any fiscal year. The country’s budget year begins on 1 July and Cayman is now operating on a two-month temporary budget plan that expires at the end of this month.  

 

CIREBA weighs in  

The Cayman Islands Real Estate Brokers Association board of directors, which last week called the proposed payroll tax on work permit holders “fiscal suicide”, was one of the groups that answered government’s call for suggestions of possible alternative revenue measures. 

The CIREBA board said in a statement issued Friday that government’s asking for suggestions from the private sector seemed like a sensible approach, but there was one problem with that approach. 

“Government completely ignored our suggestions last time this happened, and we are sure other organisations have had similar experiences,” it said. “Political considerations must now take a back seat to economic realities. That is the only way this problem can be solved internally. Further, if cuts in expenses are not made concurrent with revenue enhancements, we will be in the same position again in a few years.” 

With information provided by Lands and Survey, the CIREBA board said it had identified a potential new revenue measures that, along with “some cut backs” would generate a budget gain of approximately CI$10 million per year. The board did not specify what revenue measures it had identified.  

“We are sure the other local associations can – and already have – identified sensible adjustments on both sides of the ledger in their area of expertise, and we believe the totals could cover the entire short fall,” it said.  

CIREBA said that the suggestions weren’t short-term fixes, but “policy changes, which will produce benefits on an annual basis going forward”.  

“If we add to that the privatization of some Government-owned entities, not only would there be income derived from a sale, but more important in some cases, would be the elimination of annual ongoing losses and expenses.” 

The CIREBA board said that if the private sector recommendations were not acted upon, Cayman would be faced with “the same problems next year and the year after, assuming we are still in business”.  

 

Fallout not discriminatory   

Former government economic advisor Paul Byles, now CEO/partner of First Regents Bank & Trust, said the proposed payroll tax on work permit holders making at least $36,000 per year only would have significantly damaged Cayman’s economy. 

“I have not been involved [in a government advisory position] for over two years, so I am not aware of any details of the previous proposal or the final set of alternative measures that have been referred to,” he said on Saturday after hearing the payroll tax was possibly off the table. “But It is good to see that the community enhancement fee is being reconsidered because, to date, the local debate has focused on the fact that the new measure will affect expats only and had created, in my opinion, a false sense of comfort among some Caymanians.” 

Mr. Byles said people should make no mistake about the economic fallout of the proposal had it been implemented. 

“That economic fallout would not have been discriminatory,” he said. “It would have harmed everyone equally and in some cases the hardship to Caymanians, in the form of loss jobs and a decline in demand for products and services faced by local businesses, would have been tremendous.” 

 

 

Business community speaks out 

We, the undersigned, requested a meeting and subsequently met with the Premier to provide an alternative solution for revenue measures to the proposed “Community Enhancement Fee.” We were advised that if we were able to provide sound, viable alternatives, the Premier and the Government would be prepared to consider these alternatives. 

We are pleased to say that after many hours of careful review and input from most sectors of the business community, we were able to propose alternatives that are acceptable to the Premier and the Cayman Islands Government in lieu of the “Community Enhancement Fee.” We support the Premier and his efforts to meet the parameters set for the budget. 

We recognise that in order to reach this point, it will require all areas of the economy to participate and contribute to the revenue enhancements, and they should not be borne by any single sector. 

Clearly the proposed Community Enhancement Fee has created polarity and division within our community, and this has caused us great concern. 

We are a welcoming diverse society that recognises the contributions of Caymanians and expatriates alike, and we are confident that the new revenue measures will provide a way to share equitably the responsibility of providing revenue to the Government. 

The Premier has committed to making a public statement on Monday night at the Mary Miller Hall agreeing to suggestions – proposed by us and others – and removing the Community Enhancement Fee from further consideration. At this time, he will provide details on the new revenue measures that Government is considering. 

Our purpose is making this brief statement at this time is to help relieve the anxiety that presently exists within our community. 

 

Respectfully yours, 

 

Woody Foster 

Brigitte Kirkconnell-Shaughness 

Roy McTaggart 

Dan Scott 

Al Thompson 

Gene Thompson

13 COMMENTS

  1. Make no mistake, there will still be fallout from this. People, myself included, who were considering investing in Real Estate here must now reassess the risks involved. Providers of Home Equity loans must do the same.
    Fear that this government, proposers of arguably the most unwise legislation in the nations history, may do something of equally poor judgment will weigh on any investor for a long time to come.

  2. It is good to see that the local business community has come forward with alternatives to the Community Enhancement Fee.

    It appears at this stage that everybody has had their say except for the voters. Do we need another referendum so that this issue can finally be put to rest?

  3. So in Cayman there is a revolt against taxing, additional taxing which was triggered by Government overspending. Now where is Mac during this uprising ? In Jamaica with his entourage staying in a fine hotel and celebrating that countries independence on our tax dollars. Jamaica a county where poverty is astonishing, crime is rampant and their dollar is worth pennies. Oh well, if you need advice on how to run a prosperous country , Jamaica is the place to go.

  4. Does anybody know how someone on a two, three or even four year work permit qualifies for a twenty year mortgage?

    I have a friend that was just approved for a twenty year mortgage despite the fact that they are on a work permit. I am happy that they got the loan but was somewhat surprised as I thought that the lender would have considered the risk to be unacceptably high because of the work permit.

  5. From my view Cayman owners of most businesses would have to pay this 10% TAX put on his expat workers with higher wages to make up the loss of income. I’m not sure what the Mac’s next scheme will be but damage has been done to the Cayman brand.

  6. Any increase in the cost of having expats on the island, whether it be higher work permit fees, an expat tax, etc. only makes Cayman MORE dependent (financially) on the presence expats in Cayman. This is not a sustainable way to organize the country’s finances.

  7. Good morning It is about 9:30 am my 1 faithful cayman worker has shown up the other 5 havent shown up yet
    they did however show up sat and sunday looking some extra for laundry and beer. I dont really care at this point My customers will understand.
    I am an expat and can go back anytime I want and have it much easier, but i do love my people and that is why i stay. If i go unna will suffer.
    BTW I have invested almost 2 million in this place and years of hard work arent I supposed to have status or something ???

  8. I gratefully salute Woody Foster and the other local business people who worked within the system to calm the tidal wave of unrest created by the Premier’s ill-conceived Community Enhancement Fee. Such business leaders provide the ballast to keep the Good Ship Cayman upright during the current economic storm. Well done!

  9. @mackb

    Work permits are not necessarily a consideration on mortgage loans, it is the income one is generating, this will likely continue even if the job is moved to another country. This together will the deposit one has to pay and thorough credit checks means that work permit length generally doesn’t come into it.

  10. Interested Bird: You said a mouth full. Cayman once had a sustainable economy, hard but sustainable..

    The economic planners in the US once eyed the population of china with two views, cheap labor and a billion consumers. With no regard to national interest the profit mongers shipped their factories overseas, leaving their community jobless while importing cheaply produce goods from the country they hoped would consume their products.

    The irony is that America became the consumers, and in debt to China in the trillions.

    Closer to home; Jamaica built up its infrastructure by borrowing huge amounts from the world bank, when they tried to restructure their economy by devaluing their currency, many of the businesses left their product to rot on the shelves rather than to accept a reduction in profits.. Jamaica is slowly recovering and I dare say has an economy much more sustainable than Cayman.

    Capitalism therefore needs to be partnered with sustainability, with national interest (people) being a priority along with profit.

    Clearly the expats who say they will leave Cayman if they are taxed do not have the nation interest on the same shelf as their profit making objectives..

    Companies simply locate to places where their profit margins can be maxed, it just so happen that Cayman has made it so favorable to business that they immigrated in such great numbers that sustainability was forsaken for a quick improvement in a overly inflated standard of living, built on a transient economic model with pillars that can easily be crippled or removed.

    One may look at the sustainable efforts of protecting our fishing grounds as positive; if you take a closer look you will understand that consumers must be removed from their natural ability to sustain themselves and forced to fit in a packaged consuming slot of capitalism..

    If you do not believe me, see who uses our free coconuts off the tree, and see who buys it, canned in a neat consuming unit..

    I wait the new and improved proposal planned by government. I doubt business regardless how big have the right to determine or broadcast changes in government policy before government do..

  11. @confused

    Thank you for the valuable feedback.

    Is it then fair to conclude that most of the foreign workers with mortgages have sufficient disposable income that they would be able to service a mortgage facility in Cayman while potentially servicing another mortgage facility (or paying rent) in another country?

    The trend that I have seen in recent years is that, while work is moving to other countries, the jobs associated with that work is not moving at the same pace. I think this has a lot to do with the global recession but is exactly the reason why it is more critical then ever for lenders to factor in the work permit before approving a mortgage facility. Additionally, the real estate market in Cayman is not the same as it was 15 years ago; so when a foreign worker decides to leave the country it will be very difficult to recover any monies owed to the bank after the assets securing the facility have been sold.

    Would you be able to provide any information on the types of credit checks that are performed by the local banks during the application review process (i.e. Do the local banks have access to credit bureaus like Experian and Equifax?, etc.)?

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