Cayman has a “regressive” tax system that stifles economic mobility and incentivises development, according to a Yale University economics professor.
Speaking at the Roy Bodden symposium last week, Mushfiq Mobarak said the island’s revenues came largely from consumption taxes, such as duty on imports, rather than the more common global model of income taxes.
“A billionaire pays the exact same tax on a carton of milk as a poor person,” Mobarak said.
The impact of that is poorer people pay a much higher proportion of their salary in taxes, Mobarak said.
One of government’s other main sources of revenue is stamp duty and taxes from development and sales of property. Mobarak said this created a pressure to “build, build, build” in order to balance the budget.
He highlighted the developer-heavy make-up of the previous Central Planning Authority and pointed out rules in other jurisdictions require a cost-benefit analysis of the impact of development on the environment in the decision-making process.
Mobarak, who is from Bangladesh and is married to a Caymanian woman, said he was not speaking out against high-end development, which he acknowledged had some economic benefits.
But he said there was a need for balance, given the mangrove loss that had occurred over the past decades.
“When you have a Central Planning Authority that has high representation from the construction sector and little representation, if any, from the environmental sector, you are not going to be able to strike the balance that is right for the future of the country,” he added.
Mobarak was speaking before changes to the CPA board were announced on 1 July and his comments were in reference to the previous board.
- This article is part of a short series based on some of the presentations from a symposium titled “JA Roy Bodden Public Intellectual: Interrogating the Cayman Society” held at the Harquail Theatre in Grand Cayman on 24 and 25 June. Many of the lectures were influenced or inspired by author and historian Bodden. To watch the full event go to the government’s YouTube channel.