Cayman has been blessed with the absence of taxes on income, corporate earnings and annual property values — some of the most common forms of “direct” taxation in the wider world. But make no mistake, our country is rife with taxes, though we tend to use other words to describe them, such as “duties” or “fees.”
For example, instead of an income tax, Cayman has “work permit fees” that vary according to job category rather than salary. Instead of a property tax, Cayman levies a hefty one-time “stamp duty” at the time of each transaction. Instead of a sales tax, Cayman charges import duty on items at the point of entry, at a basic rate of 22 percent.
When it’s all said and done, Cayman’s government brings in just as much revenue, per resident, as do the governments of Canada or the United States. One consequence — and this is an undesirable one — of Cayman’s system of “indirect” taxation, is that it tends to obscure the link between the amount of money residents are giving to government, and the level of service government is providing to residents in return.
(Let us here note that Caymanians, i.e. voters, are exempt from certain taxes, particularly immigration fees — and also are eligible for greater government services, such as social assistance and free public education. For the electorate, the link between what they give the government and what they receive from government is not simply obscured, it’s skewed.)
Apart from the collection of revenue, there are other kinds of “taxes,” as well. These are called “hidden taxes” — and they are the costs incurred by citizens as a result of corruption, inefficiency or mismanagement on the part of government. It could be something as intangible as time lost waiting in line at government departments, as oblique as increased security measures taken by businesses in response to rising crime, or as blatant as charges to fix an automobile battered by ubiquitous potholes.
As related in Wednesday’s Compass, Red Bay resident Geoff Cahill discovered one of those hidden taxes when he had to pay $1,000 to a mechanic to repair damage to his truck caused by unsatisfactory road conditions in his neighborhood.
We have brought up before the conundrum of how a country as wealthy as Cayman can somehow not find funds for things such as emergency vehicles, proper waste management or road maintenance. The answer is that government regularly chooses to spend its money on other things, such as civil service salaries and benefits, government-owned companies (such as the Cayman Turtle Farm and Cayman Airways) and expensive capital projects (such as Clifton Hunter High School and the as-yet-unfinished John Gray High School campus).
One reason that successive elected governments have managed to escape accountability for their continuing mismanagement, is that the way government derives its funds insulates taxpayers, and particularly voters, from the feeling of paying taxes and the resulting expectation of receiving a certain level of service in return for their money.
Yet, as expatriate parents realize from their hefty bills for private school tuition, commuters are reminded of by nosefuls of stench from the George Town dump, and Mr. Cahill found out from his mechanic, the costs (no matter how “hidden”) of poor governance will, ultimately, have to be paid.