Cayman premier scraps expat tax
GEORGE TOWN, Cayman Islands, Thursday, August 9, 2012 – Two weeks after Premier McKeeva Bush, outlined plans for a new revenue earning measure to be charged to foreign work permit holders, the Cayman Islands government has proposed alternatives to this “Community Enhancement Fee”.
The Community Enhancement Fee was to be charged at 10 percent of the remuneration paid to foreign work permit holders in the Cayman Islands in respect of remuneration levels that exceed CAY$20,000 per year.
However, there was widespread backlash from citizens and the private sector and even the influential international Forbes magazine called the tax “fiscal suicide”. Now, following discussions with local business leaders, Bush has identified alternative revenue sources, including increased work permit fees and a number of other revenue raising measures.
Bush announced to a public meeting in Red Bay last night (August 8)an increase to work permit fees above CAY$1,000, which he projected would earn government CAY$7.6 million in the current financial year.
Bush said the increases in the work permit fees would affect real estate sales agents, financial controllers, accountants, managing directors and chief executive officers. “Those are the group that will bear the burden of the work permit fees,” he said.
Among other new revenue measures Bush announced were increases to the tourism accommodation tax from the present 10 per cent to 13 per cent; departure tax up by CAY$10 per person; and increases on stamp duty on certain insurance policies and changes to master hedge fund registration fees, which were projected to earn the government an additional CAY $1.2 million this year and $2.3 million, respectively.
The government is also estimated to earn an extra CAY$9 million from an increase in the annual registration fee payable for exempted limited partnerships.
There will also be some changes to the current 7.5 per cent real estate stamp duty level for Caymanians and non-Caymanians. However, Caymanian first-time buyers will have stamp duty concessions, the premier said.
The premier also said there would be fees for what he called “traffic regulation” during the current fiscal year, but he did not elaborate on what those would be.
Owners of leisure or non-commercial boats of over 30 feet long will pay a fee and that fee would increase depending on the length of the boat. Bush projected this could earn the government about CAY$500,000 in this financial year said.
“In aggregate, the proposed alternative revenue measures proposed by the private sector group are expected to generate CAY$44.3 million in 10 months and $53 million in the full year,” the premier said.
These proposals were among several brought to the government by a private sector group late last week and during this week, Bush said.
Several industry associations had released statements opposing the tax when it was first mooted by the premier and the private sector association Cayman Finance said the government has not done enough to rein in government spending to justify a measure such as a payroll tax.
A strongly worded statement issued by the Cayman Islands Real Estate Brokers Association (CIREBA) last week said: “The foundation of the lunacy surrounding this approach lies in the fact that this attempt to tax and spend our way out of financial trouble has been tried repeatedly over the course of history and failed miserably each time.”