Bush presents budget alternatives to expat tax

Premier McKeeva Bush is replacing the controversial expat tax with increased work permit fees and a number of other revenue raising measures.

At a packed meeting in Mary Miller Hall in Red Bay Wednesday night, 8 August, Mr. Bush announced that the increase to work permit fees above $1,000 would earn the government $7.6 million in the current financial year.

The premier said that work permit fees of between $1,000 and $2,999 will see a 5 per cent increase; work permit fees from $3,000 to $3,999 will increase by 10 per cent; fees between $4,000 and $4,999 will go up by 15 per cent; fees from $5,000 to $5,999 will increase by 20 per cent; fees of $6,000 to $7,499 will increase by 25 per cent; fees of $7,500 to $14,999 will go up by 30 per cent and fees from $15,000 to $24,000 will go up by 35 per cent.

Among other new revenue measures Mr. Bush announced are increases to the tourism accommodation tax from the present 10 per cent to 13 per cent; departure tax will go up by $10 per person; stamp duty on certain insurance policies will earn the government $1.2 million this year; and changes to master hedge fund registration fees will bring in $2.3 million.

The government also expects to earn $9 million from an increase in the annual registration fee payable for exempted limited partnerships.

Mr. Bush said the increases in the work permit fees would affect real estate sales agents, financial controllers, accountants, managing directors and chief executive officers. “Those are the group that will bear the burden of the work permit fees,” he said.

Mr. Bush said the government proposes reverting to the previous stamp duty regime of 7.5 per cent for Caymanians and non-Caymanians.

Caymanian first-time buyers of land worth up to $100,000 or homes worth up to $300,000 will not have to pay stamp duty. Caymanian first-time buyers purchasing land for between $100,000 and $150,000 or houses or apartments for between $300,000 and $400,000 would pay “a reduced rate of 2 per cent” stamp duty, Mr. Bush said.

Mr. Bush
said pension contributions for work permit holders in the private
sector would no longer be mandatory, as he had previously announced. 

The premier said there would be increased traffic regulatory fees during the current fiscal year, but he did not elaborate on what those would be, other than they would raise an estimated $6 million.

Owners of leisure or non-commercial boats of over 30 feet long will pay a fee that would earn the government about $500,000 in this financial, Mr. Bush said. That fee would increase depending on the length of the boat.

These proposals were among several brought to the government by a private sector group late last week and during this week, Mr. Bush said.

“In aggregate, the proposed alternative revenue measures proposed by the private sector group are expected to generate $44.3 million in 10 months and $53 million in the full year,” the premier said.

The Cayman Islands government was forced to implement a two-month temporary spending plan in July to keep the public sector operating until a full budget for the financial year 2012/2013 could be approved.

Mr. Bush said the United Kingdom Foreign and Commonwealth Office wants Cayman to have a projected operating surplus of $76 million. With the new proposed revenue measures, along with cost cutting and other revenue raising proposals announced by Mr. Bush earlier, the Cayman Islands Government had achieved a projected operating surplus of $70 million.

The premier said the Foreign and Commonwealth Office had requested Cayman to make further cuts

“I am hoping to get a favourable reply from the Foreign Office by Tuesday of the coming week and deliver the budget to the house [Legislative Assembly] by 20 August. That only gives us 11 days to get it done.” Mr. Bush said.

Administration officials said last week that Cayman only has spending authority through 31 August right now, and that another temporary budget might be necessary. By law, Cayman can have a temporary budget up to the first four months of any fiscal year.

Although the tax on expats’ salaries of more than $36,000 has been taken off the table and replaced with the new measures Mr. Bush announced Wednesday night, other measures such as civil servants paying towards their pensions and health insurance coverage remain in the government’s revenue plan.

For more on this story, read Friday’s Caymanian Compass.

 

 

Editor’s note: This story has been edited to include the details regarding stamp duties and pension contributions for work permit holders in the private sector, and further clarified. 

17 COMMENTS

  1. Perhaps it’s me, but I hardly see a difference in this new plan. Fees, taxes, permits, stamp duty, whatever you may wish to call them, it all boils down to expats having to pay more to live and work in the Cayman Islands.

    Most notable is the utter lack of government spending cuts.

    The new plan is equally unsustainable as the expat tax plan.

  2. You’re right the Burdon is still on Expats to maintain the Island financially, they just put a different twist on it so that it doesn’t sound like Income Tax. But I’d say it’s the lessor of two necessary evils. Another thing about this is that unlike the expat tax, these measures will also hit homeowners if they have short term rental properties like myself Caymanians or foreigners. But what can you do, I’d still say it’s not as ugly as the idea of income tax.

    Those work permit fees are going to be the highest in the region if they are not already, I can imagine some of them in 10K range now going up to the 13-14 K range isn’t going to make many people happy.

    The biggest issue is the fact still remains that the cost of the civil service is what’s sinking the good ship Cayman, and there seems to be no plan to raise this anchor, so in my opinion all they did as delay the inevitable.

    When you spend spend spend, eventually you are going to have to pay the piper..

    A boat that continually takes on more weight than it can sustain will eventually sink.

  3. Did I miss it ? In this article I could not find a reduction of MLA’s fat salaries , less cocktail parties, less trips around the world to accomplish nothing, less first class seats, less entourage, less free paved roads on the Brac, less less. Oh well let’s slam our tourist market with further taxes, that should help fill our hotels.

  4. Really? I mean, really? So he completely ignores and undermines all the sensible alternatives put forth by our respected businessmen and representatives. Great democratic work Mac! Here’s to more international ridicule. The social network will be fired up again today! As enough damage had not already been done. I am staring to feel a bit like a clown in a circus ………… when I used to be proud to inform people that i live in the Cayman Islands.

  5. One thing that hasn’t been mentioned and would be a huge source of revenue would be to increase the fee for offshore incorporations. So why aren’t they increasing their fees? As well as the yearly renewal fees? How many millions more would that create in revenue? Does anyone know how many offshore incorporations are registered here?

  6. @Semantics – Nothing is for nothing! You cried when there was an expat payroll tax on the table. The Premier said he was not going to cut his own Caymanian. Of course, you should know that good leaders look out for their people. If you go back to your country, you would want your leaders to look out for you likewise! Golden Rule: do unto other what you would want them do unto you! Our Premier then consults with the business community and drops the expat tax idea altogether for increasng fees, such as work permit fees. And now you are comment here, complaining about that too being another tax. I believe you must be ranting and raving… Yes, nothing satisfy some of you but to see Caymanians in their own country sitting at your footstool! I guess you get away with it in other countries as well, but not here bobo!

    @NJ2Cay – Note increase in work permit fees is not directly taxing expats. The employer by law has to pay the fees. If the employer refuse to pay and has the employee paying for it, he breaches the law and could be laible of paying fines in the thousands. It has always been like that. So anyone that calls themselves an expat saying this is another tax, is just making noise, knowing that the Premier is not changing the law to suit them.

    @Polomol – Even if the MLAs cut their fat salary, that would be a drop in the bucket. But nice suggestion.

    @CaymanMermaid – great idea, but bear mind the banking and financial industry are the two legs Cayman standing on. If there is any cuts, it would be wise to avoid cutting or even touching those two legs.

  7. Perhaps it is time the good Premier Bush step down. If he is unable to bring himself to find cuts in the budget and make it more enticing to live in the Caymans, rather than tax the backbone of the economy, it is time to go.

  8. Mr. Bush if you really care about this island and its people all of its people roll up your sleeves invite vested stakeholders and tear that budget apart.

    Remove every penny of waste and make the hard cuts to over spending then start raising fees to make up for the shortfall in the revenue side.

    A little pain now will go along way to induce growth and a future surplus to fund social inequities.

    It is an impossible task to just keep spending and increasing government revenues to cover shortfalls.

    No tree grows to the sky!

  9. Spending greater than income = bankruptcy

    Spending less than income = prosperity

    Is it really that complicated?

    Cut the waste! Stop crippling the economy so you can buy votes! Or better still, just resign.

  10. Sorry folks, the site seems to have deleted the symbols for more than and less than which should have been in my last post. You get the message, I’m sure

  11. Well, it seems that the Cayman Islands Government does not believe that cuts are required at this moment. Their efforts to get an approved budget looks to be only in additional revenues. Why do the Caymanians that works for the Government are allowed to vote in national election? Is it this a conflic of interest? Only Caymanians working for the private sector should be allowed to vote. What a dream! Any futur budgets would be approved in a minutes.

  12. These fees are obviously much better than a direct tax, however, that is exactly what Mr. Bush wants us to believe. These indirect taxes will increase the cost of doing business and inflation will occur. It seems to me that the Premier is more focused on giving money out to the Caymanian people instead of driving down costs to do business here in Cayman which will in turn, make Cayman a better place to live for everyone.

  13. if the legislation members would read the International Maritime Law the Small Commercial Vessel Code (vessels up to 75ft carrying people or cargo) the Cayman Islands recognize said Laws Codes. Commercial vessel(boats)must be inspected by Shipping Registry (inspection fees)and must have a licens captian (license fee) and crew must be STCW95 certified / captains certified(start a course at UCCI,)citizens can be trained to hold possitions on vessel which will creat jobs and allow them to explore the world learn other cultures.
    inspection fees/ vessel licens fee/ captain license fee/ UCCI course fees

  14. to: ilovecayman,base on your post, i think its safe to say you do not work for the government, great, but do you seriously think its fare a caymanian government employee should not have the right to vote.. I guess in your opinion nationality is terminated with employment. please read the Human Rights Act. We all are equal. private sector vote therefor government sector votes. may you be blessed and good health to you.

  15. I really like my idea of taxing caymanians that work in the US I was reading on line about 1 caymanian that is a U.S. federal judge earning almost 150k a year benifits. and another Caymanian thats a CEO earning about 2.6 million and another one in tampa earning almost 4 million a year
    I have not found out the exact amount of caymanians living in the US yet but I know its in the thousands
    And why shouldnt they pay a Community enhancement fee to Cayman the mother country. If someone can find out the stats please let me know.

  16. I can only imagine the looks on the Governor and AG faces as they watch the CI government set in motion this vicious downward swirl to implosion. The ship is sinking and they want to run it hardcore into the ground. Partying all the way.
    Go out with a bang I guess.
    This will go into the history books of how not to save an overseas territory in distress.
    Just turn this place over to the people that understand finance and the ship will right itself.
    Good governance….not. Mr. Taylor, he kicked you to the curb, time for you to bring in the big guns.

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