Parliament squashed plans on Thursday for a 2% property tax to be levied on overseas property owners as a measure to pay for healthcare for underinsured seniors and children.
A private member’s motion, brought by Bodden Town West MP Chris Saunders and seconded by West Bay North MP Bernie Bush, proposed establishing a healthcare protection fund to cover the cost of providing free healthcare to all Caymanians under the age of 18 and over the age of 65.
The planned fund was to be paid for by an annual 2% tax on all property owned by non-Caymanians, non-permanent residents, and non-Caymanian legal entities, with the exception of property providing educational or medical services.
However, fellow MPs led by Premier Juliana O’Connor-Connolly said that taxing property owners and investors would damage the real estate market and harm relations between Caymanians and expats.
Public health improvements
In putting forward the motion, Saunders told the House, “Free healthcare leads to improved health outcomes, including preventing more serious health issues, reducing the financial burden on people and their families and people being plunged into debt or severe financial hardship due to medical costs, fewer sick days and greater productivity, and improved public health by limiting the spread of infectious diseases, especially among vulnerable people.”
He added, “It takes cash to care. The question then is, how much cash will it take to show that we care?”
He pointed out that 20 years ago, the cost of covering uninsured people was $6 million a year, but last year it cost $78 million, with government having to fund a $71 million shortfall, a 53% jump in just five years.
Total healthcare costs in 2018 were just over $141 million, he said, while in 2023 it had jumped to $246 million, a 74% increase over five years. The future cost of medical liability due over the next 20 years is predicted to be $2.4 billion, and has been doubling every ten years, Saunders added.
“Is this what we’re looking to leave for our children and our grandchildren?” he asked.
In response, Premier O’Connor-Connolly said, “While the objective of enhancing healthcare funding is quite worthy, there are some challenges.”
She argued that land records do not currently differentiate between properties owned by permanent residents or non-Caymanians, so a comprehensive overhaul of property records would be needed, as would a nationwide valuation, which would be “logistically and financially unviable”.
She added that the proposal could deter high net worth individuals and foreign investors from buying property here, pushing them instead to alternative destinations, which would impact property values and stamp duty revenue.
She also said that the move could “foster resentment and create a perception of discrimination” by targeting non-Caymanians when, she said, that group usually isn’t an issue regarding medical costs.
“This is considered to be a fundamental flaw in this motion,” she said. “Why is it trying to connect two separate matters of healthcare costs and the imposition of property tax?”
Other MPs spoke on the motion, including Roy McTaggart, Progressives MP for George Town East and chair of the Public Accounts Committee, who said while he believed the diagnosis of the problem to be correct, the “proposed cure is completely wrong”, calling the property tax “too complex to be workable”.
He warned it would create a “huge distortion in the property market”, causing property prices to fall, which could affect young homeowners who might find themselves trapped in negative equity.
In winding up the debate, Saunders said that given the concerns mentioned, he was prepared to amend the bill to take out the question of a property tax, and the rest can be “left to the campaign trail. That’s what elections are for, to determine the will of the people. But this is something that we need to do.”
A vote to amend the motion to delete the mention of the property tax was then passed, as was the amended motion.
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This was the right decision. It’s very easy to take the success and infrastructure surrounding us here in the Cayman Islands for granted and to begin, as a nation to feel entitled. Like a diver going too deep and loosing one’s bearings due to nitrogen narcosis, we can collectively forget how we got here. The tax deal we historically made has brought us the success we enjoy today. Camana Bay would not have been built if there were annual property taxes here. The investor would not have risked his capital with an annual tax regime in place. I like Chris Saunders but we really dodged a bullet and had this passed, the consequences to our future would have been really profound. The ATED on property in the UK has crippled investors willingness to be there and invest in property. I avoided putting millions to work there for that reason. The UK economy is in recession and bright minds are fleeing. In Canada the foreign buyer ban has brought the Country to its knees I’m my investments from there. No foreigners feel welcome and the taxes are so prohibitive that the best and brightest have run away as the property market has regressed. We are not as big or dynamic a nation as Canada or Britain but we can be smart enough o learn from their mistakes. While raising revenues and balancing a budget are important, Cayman is not a sustainable first-world destination that can keep investment flowing inward with a tax regime on income and property. We have hurricanes and mosquitoes and while it’s lovely now, the heat makes Cayman nearly unlivable between June and October. We need to be smart enough to find another way to grow our national pie, to make money, to add investment dollars to the economy and to generate revenue so Caymanians are well looked after. If you want free healthcare, sell a few casino licenses to the Wynn and MGM. Problem solved. Taxes? Create and raise them here at your peril.
Absolutely right Frank.
Killing the goose that lays the golden egg.