Members of the Legislative Assembly are in the final stages of approving the government budget for the next 18 months.
The Finance Ministry projects core government revenue to be $908.5 million in that time. Adding in statutory authorities and government companies, the ministry estimates the entire public sector will bring in more than $1.2 billion.
Finance Minister Marco Archer, presenting the budget at the end of May, said the plans do not add any new revenue measures. The budget does continue several tax and fee breaks, including reduced import duty for retailers and on building materials.
Introducing the budget, Mr. Archer told the Legislative Assembly, “These forecasts are based on economic projections, specific market conditions, government policies, and historical trends.”
The budget will reset the fiscal year for government to the calendar year instead of July through June, so this year’s budget covers a year and a half from July 1, 2016 to the end of 2017.
The bulk of government revenue for the next 18 months comes from $852 million in what’s called “coercive revenue,” meaning mandatory fees and duties, including import duty, work permit fees and company registration fees.
The biggest revenue generator for the country is categorized as “other import duty,” forecast to bring in more than $152 million. This is import duty for most goods brought into the Cayman Islands, except for alcohol, tobacco and gasoline, which are separate categories.
Drinking, smoking, driving tax
Together, importing alcohol, tobacco and gasoline account for about $52.7 million in government revenue over the next six months. Alcohol has the biggest share of that, contributing more than $27 million, with gasoline adding more than $13.5 million and tobacco adding more than $11.5 million.
Fees for work permits, collected by the Immigration Department, government forecast will add almost $100 million in revenue. Annual work permit fees for people with permanent residence are expected to add more than $20 million to government coffers. The budget forecasts almost $12 million from other immigration fees, including non-refundable repatriation fees (meant to repatriate someone if they are forced to leave or pass away while working on island) and fees for applying for Caymanian status and permanent residency.
Fees for company registration add more than $125 million to government revenue. The bulk of that income, $110 million, comes from exempt companies registered in Cayman. Bank and trust licenses add another $31 million to the budget. Mutual fund administrators are expected to pay more than $47.5 million to government and partnership fees are forecast to bring in more than $52 million.
Government expects to make $55 million from stamp duty on land transfers in the new budget. Public revenue includes another $31 million for property-related fees, including land registry fees and building permits.
Fees related to tourism, primarily charges for cruise ship departures and tourist accommodations, add more than $46 million to government’s budget.
Government expects to bring in more than $381.6 million from what’s considered “non-coercive” sources, including facility rentals, government sales and a separate set of fees.
Non-coercive fees, not be confused with the numerous fees considered coercive, are expected to contribute $158 million to government coffers.
These fees include trade certificates, marriage licenses, a number of immigration fees not included in coercive immigration permit fees, passport fees and dozens of other small fees from core government, statutory authorities and government companies.
Government expects to bring in more than $2.5 million in garbage fees, more than $2 million for vehicle inspections, $11 million for aircraft inspection and licensing, and more than $18 million in cargo handling fees.
Sales account for more than $157 million in government income for the next 18 months, including authorities and government-owned companies.
Sales include $39 million from the Water Authority, $64 million for Cayman Airways passenger tickets, and $15 million for vehicle licensing fees. Police clearances are expected to generate more than $1.3 million in revenue.
The budget forecasts income of more than $2.4 million from postage stamps, not including the $30,000 expected for “philatelic sales” to stamp collectors.
Rentals of post office boxes, government facilities like craft market stalls and town halls, contribute almost $5.5 million to the government budget in the coming fiscal cycle.
P.O. Box rental fees are expected to generate more than $1.5 million for the new budget. The budget forecasts government housing rentals will bring in $38,000.
Finance Minister Marco Archer, presenting the government budget to members of the legislative Assembly, detailed five economic stimulus programs for the next 18 months.
Starting at the beginning of this year, government reduced duty on diesel imports for Caribbean Utilities Co. for electricity generation. The import tax dropped from 50 cents to 25 cents per imperial gallon for the utility company. “This measure provides essential financial relief to all consumers of electricity in Grand Cayman,” he said in the prepared speech. The tax break for CUC will continue in the new budget.
Lower import tax for builders, retail
Government plans to continue with the lower import duty rate for licensed traders. Government dropped the import tax rate two years ago by 2 percentage points, to 20 percent. “By reducing import duty rates, we are lowering the cost of doing business and expect that retailers and service providers will pass these savings on to their customers,” the finance minister said. Government will also hold the import duty rate on building materials steady at 15 percent as an incentive for the construction sector, Mr. Archer said.
Lower trade and business license fees
The finance minister said government will continue to offer discounts on trade and business license fees as an incentive for small businesses. Local businesses that establish themselves in George Town and West Bay will be eligible for a 50 percent discount. In all other areas, small businesses will be able to get a 75 percent discount on licensing fees.
Sister Islands incentives
Government will continue its stimulus package for Cayman Brac and Little Cayman, including a 100 percent waiver on import duty for building materials and on fuel for Cayman Brac Power and Light. Incentives include a 12.5-cent per gallon import tax on gasoline and no stamp duty for land purchases on the Brac.