Conventional wisdom in politics usually dictates that those vying for elected office should avoid supporting a new tax during an election year.
However, last Thursday, Cayman Islands lawmakers discussed – and voted down – a private member’s motion that sought the consideration of a fee of .0025 per cent on all bank transactions and a .05 per cent fee charged annually to deposits held at financial institutions. Any funds raised from the fees would go toward reducing government debt, according to the motion.
The private member’s motion, which would have been considered only “advisory” to government even if it had passed, was filed by East End legislator Arden McLean and seconded by North Side lawmaker Ezzard Miller.
Mr. McLean told the Legislative Assembly that he believed Cayman’s current public revenue system, which is largely based on consumption taxes, was reaching the point of “diminishing returns” and that government should consider the transaction fees as well as the bank deposit fees.
“This is not about electioneering,” Mr. McLean said. “This motion was … submitted when government was going through some tough times. So the member from North Side and myself were trying to look at ways we could make some suggestions.”
The East End representative said he was merely asking the government to consider his proposal and that it should be discussed thoroughly with financial industry representatives before any bills were brought before the House.
“I believe it’s worth it to present [this motion],” he said. “This Legislative Assembly in the past legislated a transaction fee on local transactions in banks … I believe it’s 25 cents. So, we locals have to pay that to maintain that environment.
“I don’t want to run away people, but at the very least, the minister for education is squealing for money to educate our people. We should at least get something out of that.”
Both Premier Juliana O’Connor-Connolly and Opposition Leader Alden McLaughlin spoke against Mr. McLean’s motion before it was voted down by a 10-2 margin. Former Premier McKeeva Bush also spoke against the proposal, though all three political leaders said they realised what the motion intended and that it was a serious proposal.
“Government has gone through, in recent years, the most challenging financial circumstances in recent memory,” Mr. McLaughlin said. “We have to stand back and look at the overall position of Cayman, Inc., if I may call it that.”
Mr. McLaughlin said adding such a transaction tax might take away one of the competitive advantages the jurisdiction maintains in an industry that is responsible for about 50 per cent of the territory’s gross domestic product.
“We have to be very, very careful the messages that we send out there in the marketplace about the attitude of the CI government to financial services,” he said.
Premier O’Connor-Connolly said government would not support such a proposal, which she defined as “much too risky”.
“None of the international financial centres which we compete with are proposing similar measures,” she said. “Such fees would place us at a significant competitive disadvantage. This would have a dampening effect on the movement of capital.
Ms O’Connor-Connolly noted that the European Union has been debating a similar bank transaction tax for years and had come to no resolution on it. She also expressed concerns regarding whether any yearly tax on financial institution deposits would be sustainable.
“It is important not to fall into the trap of believing this would be an annually occurring amount,” the premier said. “Certainly, there may be revenue earned by the government in the very first year … however, we believe thereafter it’s very doubtful that such a substantial amount would be available.”
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They both are out of their mind to even mention this, it is sick to have to pay to save your own hard earned money. I can understand that times are getting hard for Caymans budget due to years of mismanagement and overspending but more taxes are not the answer, cutbacks and smart money making investments are whether they be Public or Public-Private partnerships. I can understand and respect the need for funding for education and it is a shame that school kids have to suffer because of the governments ridiculous spending habits. In my opinion Mr McLaughlin should be the last one to even speak because he played a major part of spending Cayman into the hole it’s in, although a lot of people choose to forget about that because they were too busy hating Bush over the last four years with Alden egging them on. Bush hasn’t made the greatest decisions himself but the money he cost Cayman is miniscule to the amount of debt the last leaders created. Imagine what type of position Cayman would be in now if they had of used all that money spent on big fancy buildings to build a Cayman owned Dock and fix the dump. Cayman would be making a truckload of money every time a ship docked the could be user to cover to cost of new schools and there would be no need bickering over moving the dump, hell there may even had been two roads into West bay. Just an example of how only a few bad choices can have such a long standing effect on the economy..
These guys are always against things that could potentially bring revenue into Cayman for various reasons rather its genuine concern for Cayman or just politically motivated. The one thing they have still lacked to do is offer alternatives that will not dig into people’s pockets. This to me is just a small example of what to expect if they are put in charge, the only answer they seem to have is to find new taxes or fees to cover the increasing cost of keeping Cayman afloat. First it this bank tax them it will be property and income tax as soon as they cave into the UKs pressure to implement direct taxation. One thing I can say positive about Bush is that he wasn’t trying to hear that.
Here’s a thought…
Instead of looking for new ways to raise Caymanians’ costs and make Cayman business uncompetitive…
…why not stop spending so much frickin money?
They, both bank and CIG, already charge you per transaction. Every time you swipe a debit card, they charge you, even if you only spend a dollar. Any bank transaction, withdrawal, transfer etc.charged with a fee.
In US, only merchants charged for debit/credit card transactions. Credit/debit card holder gets all kind of perks-points, miles etc.
In Bermuda, I received 1% of debit card spending back.
This thought should not even be mentioned,let alone forming a motion or bill in the House. After so many charges and the extreme markups on consumer goods, property purchases, lumber,shingles cars etc.Every time you go to the supermarkets prices are higher. What about the retirees who can barely survive now? Remember Government just recently made it compulsory to have a pension scheme. Many of the older Caymanians and residents have no pension at all.Even where there is a pension, some people are getting as little as 50 per month for pension payment. compulsory health insurance is a recent development in Cayman also. Some people only have a measly saving account, you mean they would want them to pay tax out of these? Ridiculous!! People who have a lot of money would simply transfer their money away from the Islands. Businesses whose products are finance-related would shun the Cayman Islands. This Law would cause an outcry in the Islands which would rival the protests in Greenland, Spain, Greece, and Cyprus. Right now Cyprus’s Government is facing demonstrations because of an almost 10 percent charge on 135,000 and a 6 percent on 100,000 . Remember 1stCayman Bank? this would be a drop in the bucket for the protest we would have. What were you thinking Mr.McLean? When Governments mismanage the economy they should not try to Legislate schemes that resemble socialist policies on the people because of their poor management of the country’s resources. This was a crazy idea.
I get the intent of this proposed bill, but seriously, you can’t expect to present such a bill at the eleventh hour without proper public consultation and demonstrate the clear benefits for both the consumer and the CIG. The bank will always make up for revenues deferred which leads me to my true point in responding to this article. What I would like to see the CIG through CIMA tackle is the high interest rates and transaction fees consumer pay with the low returns on our deposits. There is clearly a disparity with these so called benefits from our banks. And before anyone attempts to school me on how banks work to make their money. I’m very well versed in institutionalized bank fraud as I worked for the leading local bank here for a number of years. So moving forward after this years election, I would like to see some courageous politician step forward to propose a restructuring of bank charges versus deposit interest rates. I would also like to see CIMA establish a performance chart on their website that consumers may follow (ie: each banks interest rates, bank charge fees, CD rates, and overall survey response on customer satisfaction, etc.). This would create a very competitive market between them in a transparent environment. Guess who the beneficiaries would beYOU and ME!!!
Any political pundits willing to campaign on this for the people of the Cayman Islandsany???
The mere idea will–once more–do harm to the Islands’ reputation as a tax haven. What could be more foolish than plucking the goose that lays the golden eggs? The problem is that a transaction tax will only be the beginning. Once MLA’s have learned they can get away with introducing one tax, they will not stop there: property tax, VAT, payroll tax, estate duty, income tax, … will be next. So the Government can waste even more millions. And will kill the goose. The only solution to the Government’s budget problems are spending cuts. Which is not all that hard given the current overspending: Cayman Airways, Turtle Farm, Building Fund…