Yesterday, April 15, was the annual income tax filing deadline for the U.S. Internal Revenue Service.
To all of our American friends, our condolences. (For those of you living locally, don’t forget about the June 15 filing deadline for Americans living abroad).
To all of our non-American readers, we suggest you take a moment to appreciate your sovereignty from the U.S. IRS. A better reason to be thankful, we cannot contrive.
By the grace of someone – God (if you read the Bible), King George III (if you believe the legend of the Wreck of the Ten Sail), or perhaps innate common sense – we in the Cayman Islands are not subject to a local income tax.
The absence of an annual tax on income, as well as on property and capital gains, has done more than all the grains of sand on Seven Mile Beach to attract investment to Cayman and enable the establishment and growth of Cayman’s financial services sector.
Don’t be fooled, however. While Cayman has no taxes on income, property or capital gains, our country is far from being tax-free. The reality is, every day is Tax Day in Cayman.
Call them what you will – service fees, stamp duties, import duties, whatever – a tax by any other name is still a tax.
Just about everything in Cayman (food, furniture, office supplies, clothes, toys and equipment) has been taxed at least once when it entered Cayman, in the form of import duty, levied at a standard rate of 22 percent. Tourists are taxed on arrival and when they pay their hotel bills before heading to the airport where they’re taxed on their departure.
Some things are taxed more than once. Automobiles, for example, are taxed continually, from the moment they arrive at Cayman’s port, where they attract import duties of 29.5 percent to 42 percent, to their license and permit renewal fees. Every time motorists pull up to the pump, they are taxed at 75 cents per gallon (for unleaded).
Flip on a light switch, and you’re paying taxes – 75 cents for every gallon of diesel fuel imported by Caribbean Utilities Company in order to generate electricity.
Use a bank, drink alcohol or smoke cigarettes – all taxed.
The myriad of little and big government fees add up to one huge number: $612 million in “coercive revenue” for the current budget year, accounting for 95 percent of core operating revenues.
That’s more than $12,000 for each person living in Cayman. Yet, it seems that many residents perceive government as a source of cash and jobs, rather than as an ongoing expense. That’s wrong – and wrongheaded.
Government’s strategy of “indirect” (i.e. hidden) taxation masquerades the fact that government revenues are coming directly out of people’s pockets, even if they happen to be receiving public assistance or working for the government.
Government’s largesse – grants, bailouts, programs and giveaways – isn’t new wealth; it’s wealth that has already been created in the private sector and is being redistributed by the public sector.
We should all be keenly aware of that, and feel a significant personal investment in government’s performance, because we have all invested in it, economically, regardless of the need to file an annual tax return.