Cayman Islands Premier McKeeva Bush officially admitted defeat on a proposed 10 per cent payroll tax for certain expatriate workers Monday night, capping off nearly two weeks of heated debate over the issue.
“The community enhancement fee is now off the table and will not be implemented,” Mr. Bush said in a statement released Monday evening.
“At our public meeting on Wednesday, 1 August at the John Cumber Primary School Hall, I stated that the community enhancement fee would be taken off the table if robust, credible and sustainable revenue that did not hurt the poorest members of our Islands was found,” Mr. Bush said. “We are satisfied that many of the commitments from the private sector will meet these criteria.”
Mr. Bush did not give any specifics in his statement about what the alternative fees or taxes might involve. He did discuss potential alternatives for government financing with a group of local business leaders on Friday.
The Caymanian Compass understands that proposals like increased work permit fees for certain sectors of the economy, increased levies on certain properties, increased fees on certain aspects of the financial services sector and even legalised gambling had been discussed.
Premier Bush was expected to present specific plans this evening at a 7.30 meeting scheduled at the Mary Miller Hall in George Town.
According to estimates put forth by Premier Bush’s administration, the previous proposal for a 10 per cent payroll tax on work permit holders making at least $36,000 would have raised approximately $50 million for the 2012/13 budget year.
Cayman’s current government financial year started on 1 July and the country was forced to implement a two-month temporary spending plan to keep the public sector going until a full budget could be approved.
Premier Bush sent a $592 million spending proposal to the United Kingdom for review last week based on the implementation of the 10 per cent payroll tax on expats.
According to administration officials, the UK’s response to that most recent budget plan was “not favourable” and apparently needed more work on both the revenue and expenditure sides. The response – based on the budget that included the 10 per cent payroll tax – was received from the UK on Monday.
The reworking of new fee proposals into the budget will likely take more time and could further delay the budget’s final approval from the UK.
Administration officials said last week that Cayman only has spending authority through 31 August right now, and that another temporary budget might be needed to give the country more time to sort things out. By law, Cayman can have a temporary budget up to the first four months of any fiscal year. It has done so previously, for the 2009/10 financial year, the first budget taken over by the United Democratic Party government after its election to office in May 2009.
Premier Bush has also proposed a number of reductions within the civil service and government budget as part of the spending plan sent to the United Kingdom late last month.
However, the total spending recommended in the latest budget plan – $592 million – was far above what Mr. Bush had initially set as the goal for the civil service and even further above the goal the UK had set for Cayman in its three year budget plan.
Mr. Bush initially requested that total central government expenditure for the 2012/13 budget year be capped at $498 million, while UK recommendations for the three-year budget plan were $462 million for the current year.
In the budget year that ended on 30 June, 2011/12, projected expenditure figures were around $550 million – including an additional spending amount of $49 million approved by lawmakers earlier this year.
Calls for resignation
North Side MLA Ezzard Miller has called on Premier Bush to step down over what he referred to as a “grossly detrimental” plan to introduce the controversial payroll tax on expat workers.
“Given his actions and announcements over the past week that have shaken the financial industry to its very core, damaged Cayman’s international reputation and created further instability and division in the community, Mr. Bush should be asked to step down as Finance Minister,” said Mr. Miller.
Mr. Miller urged “all right-thinking members of the business community, Caymanians from all cross sections of society and those of us in political leadership to demand of Mr. Bush that he removes himself from the Finance Ministry, to prevent further damage to the Cayman Islands.”
As well as being premier, Mr. Bush serves as the minister of finance, tourism and development in the Cayman Islands Government.
The member for North Side said Mr. Bush had undertaken an “unnecessary and reckless departure” from Cayman’s traditional revenue sources to a form of income-determined tax, an action Mr. Miller said was “grossly detrimental to this country and he should be required to re-assign the Finance Ministry”.