PAC: Official policy for import duty concessions in the works

The Cayman Islands government is drawing up a formal framework that it says will bring transparency and accountability to the granting of concessions and waivers on import duty.

Financial Secretary Kenneth Jefferson, speaking on Wednesday before the Public Accounts Committee, said a draft concession policy was presented in caucus on Monday.

He said the proposed document was “fairly extensive” and covers areas that the auditor general and Members of the Legislative Assembly have routinely expressed concerns about, such as a lack of a formalised process for granting concessions and a lack of monitoring of companies to ensure items granted in the concession are being accurately utilised.

The policy, he said, must go to Cabinet for consideration and amendments.

However, Jefferson said, “There was absolutely no resistance from the ministers and councillors present.”

The absence of a formal concessions policy was flagged in the Office of the Auditor General’s report on Customs in the Cayman Islands, which covered the year 2017. At the time, Customs was a separate department to Immigration. Earlier this year, the two departments merged to become Customs and Border Control. Some elements of the previous Immigration Department now fall under the Workforce Opportunities and Residency Cayman, known as WORC.

On Wednesday morning, the Public Accounts Committee delved into the findings of that report, questioning Jefferson and, later in the day, Director of Customs and Border Control Charles Clifford on the inner workings of the department and its processes.

Jefferson pointed out that there was one concern that the policy was “overly prescriptive” to Cabinet in specifying what it should do and that it should be left to Cabinet to dictate the policy.

Jefferson testified that the variance between the budgeted revenues generated from Customs and the actual amount that has been accrued continued into 2018.

He said, at the end of 2018, $181 million was collected, but the budgeted amount stood at $156 million.

However, he said, work is being done to address the method of calculating the budgeted figures.

Director Clifford told the committee that his department has not deliberately under-budgeted its figures, but it is working with the Economics and Statistics Office and the Finance Ministry to “refine the numbers and try our best with that”.

West Bay North MLA Bernie Bush and PAC chairman Ezzard Miller flagged a conflict in the law when it comes to the Hotel Aid Law and the granting of concessions.

The Hotel Aid Law requires itemised listing in concession documents, including quantities, but this is not being done.

Monitoring of concessions lacking

Committee member Austin Harris questioned whether the Finance Ministry was monitoring adherence to stipulations on Caymanian employment under concessions agreements.

Jefferson said this was a “problematic area” to monitor.

He said the Ministry does not have the resources to do checks at job sites, but he said reports are submitted on the breakdown of the number of workers who have been employed by those who have been granted concessions.

However, he said, this may form part of the processes under the Workforce Opportunities and Residency Cayman department.

The Bodden Town West MLA questioned whether action was taken against those who do not meet their concession timelines or agreements.

He cited the KAABOO music festival, which he said was granted concessions for a five-year festival, but the 2020 festival was cancelled.

Michael Nixon, of the Corporate Unit at the Ministry of Finance, said there is closer scrutiny of concession spending, the quantities being imported and what the items are being used for.

Saunders also questioned the vetting process for the granting of concessions versus a more “lengthy, detailed and invasive” process for Needs Assessment Unit applicants.

Nixon said the new policy will address the process of how concessions are assessed and has “significantly stepped up the due diligence”.

The Public Accounts Committee resumes on Thursday.