Import duty reduction takes effect Aug. 1

Amid some confusion, a 2 percent reduction in import duty for most items shipped to the Cayman Islands now has a confirmed start date of Aug. 1.

Premier Alden McLaughlin initially announced the general duty rate reduction for licensed traders from 22 percent to 20 percent on “most items offered for retail sale” would begin in July, with the assumption that the duty cut would translate into a price reduction for consumers buying these items. However, Customs officials, now working with a list of some 5,000 dutiable items, needed more time to implement the change.

There is some doubt among local business owners as to whether the 2 percent reduction will actually lead to a consumer price drop.

For instance, Reflections and Liquor-4-Less owner Prentice Panton said earlier in the year that many businesses are struggling to stay afloat and need the tax relief just to survive. He said the cut essentially rolls back a 2 percent tax increase from 2010 and is unlikely to have a significant effect on prices.

Fosters Food Fair announced that it would pass on all savings from the tax cut to customers. Managing Director Woody Foster said most grocery items are affected by the cut and will be reduced in price accordingly. However, Mr. Foster acknowledged the tax cut is unlikely to make a significant difference, amounting to an estimated $2 on a $100 weekly shopping bill.

The 2 percent duty reduction on imported items is separate from a rate cut to diesel fuel imports charged to Caribbean Utilities Company, agreed as part of the government’s spending plan for this year. That rate cut – equating to an average 4.3 percent reduction on household electricity bills – is expected to take effect on Jan. 1

The Cayman Islands Chamber of Commerce had a muted response to the Aug. 1 start date for the dutiable import items.

“The Chamber has supported and advocated for lower import duty rates for locally licensed businesses for many years,” a statement from the organization released earlier this week noted. “The cost of doing business, however, has increased dramatically…as the size and scope of government has expanded into areas better served by the private sector.

“The Chamber supports further reductions in import duties so that local businesses can lower their costs in order to attract more local customers.”

Chamber President Johann Moxam said some government fees – such as work permits and licensing requirements – have increased by more than 100 percent over the past decade.

“Many businesses have had to absorb these massive fee increases in order to remain competitive in the local and international marketplace,” he said.

A wholesale review of the Cayman Islands public sector being done by “big four” accounting firm Ernst & Young is expected to be finished in the next few weeks.

The review includes central government ministries as well as statutory authorities, such as the Cayman Islands Monetary Authority, and government-owned companies such as the Cayman Turtle Farm.

Just more than 6,000 people are currently employed in various public sector services, compared to around 4,000 in 2001.

1 COMMENT

  1. The bigger issue I think is the rate cut to diesel fuel imports charged to Caribbean Utilities Company. While it is said that this will equate to an average 4.3 percent reduction on household electricity bills I don’t think this will be the case in reality.

    The cost of energy has a huge impact on all sectors of the economy and I think that we need to step back and take a look at the big picture and then decide what long term strategy is best for these islands as it is clear that things can’t continue as they are today.

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