Premier McKeeva Bush is replacing the controversial expat tax with increased work permit fees, changes to real estate stamp duties and several other revenue raising measures.
Mr. Bush said the new measures would earn the government $53 million over 12 months or $44.3 million in 10 months, the remaining time in the current financial year.
At a packed meeting in Mary Miller Hall in Red Bay Wednesday night, 8 August, Mr. Bush announced that the increase to certain categories of permit fees costing above $1,000 per year would earn the government $7.6 million in the current financial year.
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 Cayman Islands Government awaited a “favourable reply” from the United Kingdom Foreign and Commonwealth Office by Tuesday, 14 August, on the latest proposed budget plans and hoped to deliver the budget to the Legislative Assembly by 20 August.
“That only gives us 11 days to get it done.” Mr. Bush said, referring to the fact that the interim two-month budget adopted last month runs out on 31 August.
Mr. Bush said the United Kingdom Foreign and Commonwealth Office wants Cayman to have a projected operating surplus of $76 million. With its proposed revenue measures and cost cutting, the Cayman Islands Government had achieved a projected operating surplus of $70 million and the FCO had asked for more cuts, he said.
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 toward their pensions and health insurance coverage remain in the government’s revenue plan, as does the removal of mandatory pension contributions for work permit holders in the private sector.
The premier said that work permit fees of certain categories of jobs would increase.
Those work permit fees currently costing 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.
Mr. Bush said these increases in the work permit fees would affect real estate sales agents and brokers, financial controllers, accountants, managing directors and chief executive officers. “Those are the groups that will bear the burden of the work permit fees,” he said.
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 would earn the government $1.2 million this year;
and changes to master hedge fund registration fees would 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 government proposes reverting to the previous stamp duty regime of 7.5 per cent for Caymanians and non-Caymanians. However, Caymanian first-time buyers of land worth up to $100,000 or homes worth up to $300,000 will not have to pay any stamp duty, while 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.
Currently, Caymanian first-time buyers pay 2 per cent stamp duty on land purchases between $50,000 and $75,000 and on homes worth between $200,000 and $300,000.
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 year, Mr. Bush said. That fee would increase depending on the length of the boat.
Fees would be placed on tobacco products and 10 cents imposed on cans and bottles of beer, the premier said.
These proposals were among several brought to the government by a private sector group of local business people late last week and during this week, 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.
Mr. Bush also touched on the future of the police helicopter, which he had earlier said would be sold. In an about face Wednesday night, Mr. Bush said that as the police service fell within the remit of the governor of the Cayman Islands, “the UK will probably have the final say on whether that goes or whether it stays”.
Leader of the Opposition Alden McLaughlin, who attended the meeting, said immediately afterwards: “I’m in a state of shock. If a few adjustments to work permit fees, an increase in stamp duty and assorted bits and pieces will fix this problem and bridge this gap, why did we have to go through all of this? There must be some more to this story.
“This just does not add up,” he said. “If it can be fixed by adjustments on the current system we have, why are we here? – the country divided, people frightened away, business frightened away – for what?”
Mr. McLaughlin was referring to reports of job losses, real estate deals falling through and the division the proposed expat tax, which Mr. Bush called a ‘community enhancement fee’ had caused in Cayman.
Unlike the public meeting in West Bay last week in which members of the public were able to put questions to Mr. Bush and his government colleagues, no questions were taken at Wednesday night’s meeting, to the disappointment of some who wanted to know more about the measures Mr. Bush had put forward.
Eden Hurlston, a member of the Facebook group Caymanians and Expatriates Against Taxation, said: “I think there are a lot of good things there on the table. I think they need a lot of further discussion. I think they need to be available immediately for the public to look at for themselves.”
“I was very disappointed that we did not get a chance to ask questions… If I knew we were not going to be allowed to ask questions, I probably would have stayed at home and watched it on TV. So on the basis of public interaction and openness, I am a little disappointed in that facet of things… I feel like there was a lot talked about but very little said. I have to applaud some of the things that were said, but I have a lot more questions about things that came up through it,” Mr. Hurlston said.
Another member of the group, Chaz Hill, questioned why Mr. Bush had not concentrated more on the tourism industry, saying solutions like eco-tourism had been ignored.
“They already increased most of these fees in their administration already.
I don’t know why you would have pushed for this solution with the community enhancement fee.
It just pushed investor confidence to an all-time low now and we still haven’t seen the full negative effects yet,” Mr. Hill said.