Tax threat crippling business as usual

Many programmes, activities and businesses say they are losing money since Premier McKeeva Bush announced a 10 per cent tax on the income of work permit holders making $36,000 or more in the Cayman Islands.  

The tax, called a ‘Community Enhancement Fee,’ was initially going to be paid by those who made $20,000 a year or more. However, last week, Mr. Bush upped the threshold. 

One company, which assists several charities in the Cayman Islands that has been hit hard, is Davenport Construction. 

“We have lost three sales, which we had deposits for since the announcement of a payroll tax on expats last week. The combined amount for those sales was $1.3 million. One was a home worth $345,000 and two others worth $485,000,” said Davenport Construction owner Paul Pearson. 

He said the potential home buyers backed out because of the proposed tax. 

“One man is losing his deposit, as he made changes to the home he was going to buy. A deposit is nonrefundable if changes are made. However, this individual did not mind,” explained Mr. Pearson. 

He said the customer told him, “Unfortunately, whether a fee or a tax is imposed or not, the haste with which decisions are made and the impact this can have on the economy means that we would not consider buying, as it is all too uncertain.”
Davenport Construction spent $120,000 in the community last year, according to Mr. Pearson. This year, the company had a target of more than $200,000 for community projects, which included assistance to the Humane Society, Red Cross, Meals on Wheels, the Cayman Islands Youth Development Committee and the Positive Intervention Now programme, which is an after school intervention programme for adolescents in central George Town. A centre for performing arts at the George Town Primary, which was on Davenport’s agenda for this year, has now been suspended until further notice. The project was worth about $300,000. 

A statement from the George Town Parent and Teacher’s Association regarding this development read, “We are saddened that the Centre for Performing Arts project has been put on hold but we understand the gravity of the situation. We hope that the circumstances surrounding the postponement can be rectified in order to bring this amazing project to fruition. The PTA will continue to raise funds for the music and performing arts programmes, which are a very important part of the development of our children.” 

Davenport will still donate labour and materials to install playground equipment, which the PTA secured through fundraising.  

“We thank them from the bottom of our hearts for their generosity,” read the statement. 

 

Private schools  

The ultimate result of the approval of any payroll tax is also being discussed at private schools. Triple C School Principal Mable Richardson said, “The cost of living is already high and many educators do not make a lot of money. We have to pay pension and everything else and our money is already less because it comes from tuition.” She added that so far enrolment numbers were looking good, but said she hopes the school doesn’t lose any teachers.  

“Utilities have gone up and so has the cost of food and insurance. Our budgets were created before and without this 10 per cent consideration and this will affect us negatively,” said Mrs. Richardson. 

Director of the Cayman Islands Prep Schools School Board Bryan Bothwell said, “At present, I am hoping that the proposal will be withdrawn for the various fundamental reasons that have been well aired already. 

“….the school is currently closed for vacation and the board and management have not been able to discuss it or reach any decision.” He said nothing could be done until the extent of the proposal is known. “As a school that is dependent on fees for over 90 per cent of its costs, and as a non-profit organisation that operates on a break-even budget, number of students and staff costs are the two critical components of our budget. Any negative outcome on either or both of these would lead to a deficit, which we would have to find some way to fund. This is particularly so at this time because we have had to be tighter on any budgeting for contingencies for the last couple of years as we have endeavoured to avoid or drastically minimise fee increases because of the affect of the worldwide recession on the income of our parent body. We have already settled fees for the new year starting in September; so the lack of notice in respect of this or any other new revenue measure that would impact us immediately makes it even more difficult to look to that source to cover the new costs.  

“However, though it would be a board decision, my personal approach would be that we would have to make good the costs of the tax for the staff that would be affected, as we have contracted with them on the basis of gross pay without any deduction for tax. Even in future years when we would be entering into new contracts I would anticipate that our salaries would have to increase to compensate; otherwise we would not attract the staff we need. We would also not stop making pension provisions for any of our staff.”  

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