Proposals in favour of creating a system of property taxes within the Cayman Islands will lead to political problems for any government that introduces such a plan.
The reason: There are still a number of Caymanian families – i.e. voters – who own large tracts of land in the Islands, particularly in East End, North Side and Bodden Town districts, that are largely undeveloped.
A number of these families are not wealthy, but have managed to hang onto sizeable tracts of undeveloped land. If any sort of tax is levied on those lands, the high probability is those families would have to sell their plots on the cheap.
“I honestly think that is the case with a lot of people,” said Graham Rankin, who jointly owns about 62 acres on Grand Cayman that he said has been in his family for generations. “Some people just haven’t sold the land because of pride and other reasons…and where the land was inherited, they would prefer to hang onto that land.”
Some of it, Mr. Rankin said, is used as farm land where people raise cows or have a small plantation. “Enough to feed themselves, but not to make any money off it,” he said. “But at the end of the day, they still have the property.”
Cayman Islands Chamber of Commerce President Chris Duggan has previously said in interviews for this series that, if forced to do so, the Chamber would likely support a property tax over any other form of direct taxation.
“It’s a non-discriminatory tax, it’s not put on one section of the population,” he said. “But it may discourage property ownership and it will impact everybody [with rent prices factored in]. It would be a last resort for us.”
But Mr. Duggan acknowledges the problem set out by Mr. Rankin.
“There are many indigenous families here who are land rich, cash poor,” he said. “They will be hit to the point where they probably would have to sell off the family land which, again, is a problem we don’t want to have. Whatever tax you introduce, there are going to be issues.”
Estimates from back in 2009 put the total value of listed real estate in the Cayman Islands at between US$12 billion and US$18 billion. Some of those listings include vacant, undeveloped land but not all such properties are for sale.
Assuming a half-per cent charge on the total value, Cayman’s government would earn between US$50 million and US$90 million. If one speculated that just one-tenth of those properties were vacant land, that would generate between US$5 million and US$9 million through property taxation.
The annual central government budget for Cayman has been in the range of CI$500-$550 million the last few years, or US$590 to US$650 million. So the revenue from taxing empty land might be relatively small when considering the total government budget in any case.
Mr. Rankin argues that Caymanian voters might be more likely to go along with a property tax idea if certain exemptions were carved out for undeveloped land owners.
“I personally would say [implement property taxes] for land that was commercially developed, where that property earns revenue,” he said. “I don’t know if it’s fair to charge some small, two-bedroom house that doesn’t earn any revenue.
“We should also categorise properties; Seven Mile Beach properties should be charged a lot more than some little commercial store on Crewe Road.”
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