The reason this public information was so much of a revelation, we believe, is that most of the revenues the government collects are from “indirect taxation,” and, therefore, are “hidden” from those who are actually paying them.
Such a system can be deceptive and insidious, since it easily leads to the impression that the cost of government and the services it provides are, in effect, “free” — or at least paid by someone else.
Far from it. Consider gasoline prices at the pump:
Following several stubborn months of exceptionally high gas prices, it appears that the cost of fuel may have peaked for the moment, sliding about 20 cents per gallon in the past month, as the Compass reported last week.
Now it’s “only” about $5.39 per gallon in Grand Cayman. Much finger-pointing has taken place lately among government, gas station owners and fuel distributors over who exactly is responsible for the high prices we pay, but it appears that, generally speaking, Cayman consumers are the victims of the usual economic conspiracy — global pricing, purchasing patterns, small market size, distribution expenses, profit margins tacked on along the supply chain, and government fees.
The only factor we have any direct control over is this final one. On every gallon of gasoline imported into our country, the government collects duty of 75 cents. That means, every time you buy 15 gallons at the pump, that’s $11.25. For 20 gallons, that’s $15. Put another way, hidden government fees add up quickly.
The same basic narrative holds true for almost all purchases made on island.
Though officials have peppered (littered?) the Customs Tariff Law with various exemptions and exceptions, the standard duty rate on most imported goods is 22 percent — which is levied not only on the “value” of the item, but also the cost of bringing the item to the island.
(For example, a pharmacy orders an $80 crate of toothbrushes. The cost of delivery is $20, including shipping and insurance. The pharmacy will pay government a total duty of $22. That means the pharmacy must immediately mark up the retail price of the crate of toothbrushes to $122, and then add to the retail price a portion of such additional expenses as work permit fees, trade and business license fees, mandatory health and pension payments, payroll costs, and other overhead expenses — including the aforementioned CUC bill. Any profit margin is added to this sum total.)
The purpose of our explication is not to disparage the government for levying taxes and collecting revenue. Every government does that. In the absence of direct taxation on personal income and property, the import duty is a powerful, and potentially efficient, means of raising the funds government needs to function.
Our intent is simply to remind residents that Cayman’s international reputation of being a tax-free haven does not apply to them. The truth is, as Ernst & Young partner Kieran Hutchison pointed out in a November presentation, “As a jurisdiction, people view Cayman as tax-free, but we just raise revenue in different ways.”
However, as we will continue to argue, the Cayman government collects and spends far too much for a jurisdiction of our size.
And we Caymanians and foreign residents are paying dearly for such largesse and excess — at the fuel pump, on our electricity bills, in the grocery store, on the loading dock, in the immigration office, at the planning department …