Expat tax out, higher work permit fees in

McKeeva Bush at MMH 9 Aug main

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. 

 

Fee increases  

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”. 

 

Reaction  

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. 

McKeeva Bush at MMH 9 Aug

Premier McKeeva Bush addresses a packed hall to reveal details of his alternative proposals to expat tax. – PHOTO: NORMA CONNOLLY

14 COMMENTS

  1. Certainly an improvement on the payroll tax, but still means the burden of the extra taxes will fall on the shoulders of foreign workers and visitors.

    Meanwhile stamp duty for Caymanian first time buyers is reduced.

    The increase in work permit fees on the higher paid creates an even greater incentive to hire qualified Caymanians into these posts.
    Example: It will now cost appoximately 20,000 dollars a year more to employ an expat laywer than a Caymanian one.

    Let us hope it happens.

    Will our tourism markets handle an increase in taxes from 10 to 13%?

    I didn’t read anything about reducing the bloated civil service.

    By the way, whatever happened to that proposal to force lawyers to work legal aid cases without being paid?

  2. Mr. Bush, et al, all this hand ringing, all this anguish, sleepless nights, blood pressure rising can be solved quite easily: Cut Government Spending!!!!!! This solution will benefit the most Caymanians and improve the outlook for all our industries, especially tourism.

  3. Ironic isn’t it? The government is always putting pressure on businesses to replace ex-pats with Caymanians which I get, but at the same time, it relies on the employment of ex-pats to balance the budget. Maybe if all the ex-pats left, the government would finally have to face the reality of having to actually manage its finances and cut spending…like most households.

  4. Where I come from, we call this type of thing income tax, sales tax and other endless types of tax. Its simple Business Math. Revenue minus Expenses equals Profit. Same idea with the Government with different words applied.

    The three previous submitters have all hit the nail on the head. The ratio of Civil Servants to citizens is horrendous. For example, I come from a small city of 250,000 people serviced by some 350 Police Officers. Cayman has the same number of officers but a population of some 55000. Duh! This is an example RCIP so dont hunt me down please. The same scenario i’m sure exists with other parts of the Civil Service.

    I noticed that there was only one person diasgreeing with anything said by submitters. Does Bush read the Compass?

  5. Was all of this ‘ex pat tax’ talk just a load of hot air and a big fat red herring to get everyone up in arms so that The Honourable McKeeva could then announce all these hikes in all sorts of other fees whilst everyone breathed a sigh of relief feeling grateful that they are not to be ‘taxed’ … you are all taxed every single time you drink, eat, buy, use anything in Cayman – he will find a way to tax the air you breathe one day … soon come ….

  6. I can’t imagine what any prudent housewife in Cayman is making of this extraordinary backing and filling by the Government’s Principal Pantomime Horse, Mr Bush. It makes the Great Houdini look like a schoolboy.
    Can’t wait to see what comes next. Ali Baba and the Forty Thieves?

  7. A rose by any other name, call it what you like it’s still going to have the same effect, less investment producing further shortfall resulting in higher costs and fees and ultimately negative growth!

    Shortsighted thinking on the part of Government and a real lack of leadership produce the same thing over and over again except now it is different.

    There is no more slack in the system, no soft boundary to push, Mr. Bush has sucked the last tasty morsel of marrow from the economy and refuses to leave enough for the patient to survive.

    What’s next will not be a pretty picture, the slow insidious suffering will permeate the fabric of society leading to more division, more alienation and class separation.

  8. The departure tax is already higher than I have ever paid leaving any other country. And headlines announcing Cayman Islands to raise tourism taxes, work permit fees aren’t going to win us any more tourist visits. Biting the hand that feeds us, no?

  9. The question becomes, do you open a business in the Caymans with a Caymanian partner and workers, or do you leave the business domicilied outside the Caymans? It is a question I will wrestle with on my way to moving there.

  10. IT’S THE SAME OLD STORY.POLITRICKS they call it MR BUSH really looking for voters, AND is afraid of certain associations. INCREASE permit all across the board.THIS make him look INCOMPETENT.

  11. We are pleased to announce that from the next academic year there will be a new class at the Cayman Islands Universtity. The new class will be on ‘Professional Vote-mongering’. The course material has been posted by the cayman compass throughout the summer. The class will be taught by professor Bush.

  12. As we all now know without a doubt, the Government hasn’t a clue how to achieve fiscal soundness. Cut cost beyond the point of pain and then back fill later when it becomes critically clear where resources are needed. Simply fire your bottom 10 percent from each department. They are non-performers to begin with and you will never even notice.

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