Big Story: The great tax divide

Some people say government’s proposal to implement a 10% payroll tax on expatriates has stirred a firestorm of controversy unmatched by any other in the country’s history. And that in itself has its own consequences which paralyses a nation that needs to pull together as a community.

On 27 Tonight local attorney Theresa Lewis-Pitcarin and financial services council member Anthony Travers joins Cayman 27’s Tammi Sulliman to discuss the tax situation in greater depth. Click here for part 2 of the discussion

  • rubi

    Exiles do not have to pay taxes unambiguous, after receiving a work permit from the authorities there is no reason they are residents of the Cayman like everyone else, shame to spoil what exists now and do not forget caimans very spoiled and will never work the works of exiles like restaurants, cleaning companies Security jewelry stores that in the island, exiles are respecting the island and living in like everyone else and needs to enjoy other benefits such as local or themselves, shame to create unwanted discrimination at all,
    Thank you

  • NJ2Cay

    The one thing that always made me comfortable about investing my retirement savings into Cayman was the air of Financial stabilty. My goal was to make the right decisions so that I would be able to live a comforatable lifestyle in my senior years. So I invested in property in Cayman instead of the US. It is really disheartening to watch as all my plans and hopes come crumbling down. And realize the we may likely lose everything we’ve worked for, but I am sure I am not the only one, surely there are plenty of Caymanians that will suffer as much or even more.

    My heart goes out to you Cayman, I guess you weren’t immune.

  • NJ2Cay

    Some sy that this is crossing the Line but I personally think that the line has long been crossed and the precedent set, it’s just starting to materialize in more obvious ways. It seems that the culture of Cayman which is bred deep in its government as well as it’s people has developed to a state where people truly believe that you can live above your means and not pay for it in the long run or have to pay for it. Just read the comments such as Expats should have to contribute to help the community, yet the same people do not believe Caymanians should have to as well. Those who think taxing only expats is a good idea, will soon live to regret supporting this when the infrastructure for collecting taxes is in place and next year’s election has passed and they find themselves in the line of fire.. I don’t think this tax will mean no more expats in Cayman some may leave but I’m sure more will come because most of the world is used to direct taxation so it will be nothing new but to Caymanians this will be destructive and will drive the cost of living even higher, but times do change.

    Government spending has long been on out of hand for Cayman as well as other countries, the difference Is that Cayman does not have the tax revenue nor the population to maintain their standards. The government has already set a precedent that when the money gets low they just make up new fees or increase existing ones to cover it, in lieu of controlling their own expenditures. Last year it was a fee on every hedge fund, this year it’s the expat tax, Excuse me Community Enhancement Fee, as if a penny of it will be used to actually enhance the community. Don’t be surprised if next year there’s another tax on Tourists just to step foot on the island or a tax to swim in Caymans Water.

    Something to consider people, the same government that say this tax will only be on expats should hope to raise 50 million Dollars, if I am correct the are about 20,000 expats on the island. If the government wants to raise that amount of money they would have to collect an average of 25,000 dollars from each and every Expat and that could only be done if each one of them made 250k a year and paid 10 percent.. That number changes significantly given the fact that this is only supposed to be levied against those making more then 20k a year. So ask yourselves when the CIG falls short of what they want, what do you think will happen, raise the tax to 20 or 30 percent or start taxing Caymanians making it even harder for them to survive with an ever increasing cost of living.

  • Progress

    It would be great if you would move my comment below from the “feedback section” to this section entitled “Big Story: The great tax divide”

    “I think it is probably the single greatest existential threat to the Cayman Islands in over 200 years”. Anthony Travers, Chairman, Cayman Islands Stock Exchange. See interview in Cayman 27: http://www.cayman27.com.ky/2012/07/27/big-story-reality-of-payroll-tax Students of business and government often refer to how a company or a country makes money as the business model. Understanding the business model of a country, enables one to make choices that enable the country to succeed. Misunderstanding the business model can lead to existential threats. The business model of a tax free jurisdiction is to be tax free so as to attract businesses that would otherwise have located elsewhere — and in place of taxes to attract fees from the companies and any expat employees with specialized skills that these businesses may employ (in addition to Caymanian people they would employ but for whom there would be no fee to the government). It is the combination of company fees, expat fees, import duties, etc. etc. — all indirect taxes — that make it possible for no one (whether they are Caymanians or expats) to pay direct taxes. It is also these fees which fund MLA salaries, compensation for civil servants, unemployment benefits, social services, police, schools, roads etc. The moment a tax free jurisdiction introduces a direct tax, any direct tax — whether on Caymanians or expats — it ceases to be a tax free jurisdiction and it signals to investors that it has entered the “slippery slope” of a taxable jurisdiction. As Anthony Travers states, “The confidence placed by investors in the tax free status of the Cayman Islands is based, not simply on legislative structure, but on a belief that the core philosophy of the Cayman Islands’ people would always find direct taxation repugnant.” http://www.ieyenews.com/2012/07/anthony-travers-comments-on-premiers-proposed-tax-on-work-permits/ Once this belief is violated — through the precedent set by a direct tax, any direct tax (such as the one proposed by the Premier last week) — companies and investors seeking a tax neutral jurisdiction will locate elsewhere (in other tax neutral jurisdictions), and over time the fee income will disappear completely. For every dollar of fee income that disappears, the government will have to replace it with a dollar of taxes. Once virtually all fee income is gone, almost all government revenues will have to be raised through direct taxes. Since most international businesses will have left at that point, the base of expats will be very low and the expat fees will correspondingly diminish. To pay for government expenses at that point — MLA salaries, civil servants, unemployment benefits, social services, police, schools, roads etc. — a direct tax will have to be applied to both Caymanians and expats. At that point, the Cayman Islands will — from a business model perspective (again, how the country makes money) — be virtually indistinguishable from old Mother Jamaica. There will be tourism revenue — but virtually no company and expat fee revenue — and both Caymanians and expats will be taxed. The $47,000 per capita GDP of Cayman will also — as these events unfold — fall towards the $5,402 per capita GDP of Jamaica. As income declines — and the economic activity created by international businesses rapidly diminishes — unemployment will rise. As unemployment increases, crime goes up — just as in Jamaica. It has taken several decades of far-sighted Cayman statesmen (and stateswomen), and the Caymanians who proudly supported them and sacrificed for this vision, to rise Phoenix-like out of the ashes of Jamaican administration — and to create a per capita GDP that is exponentially higher than that of Jamaica (with far less crime and a much higher quality of life). The path to eliminate these decades of Caymanian progress — to begin the slow but irreversable process of abandoning the tax free model and becoming a taxable jurisdiction like Jamaica — began less than one week ago with the proposal to introduce direct taxation in Cayman (in this case on expats). All that’s required to complete the journey is to ratify and implement this direct tax — and Cayman will once again begin the journey towards Jamaican conditions. Of course, no one will gain from this situation — Jamaica as a country will be no better or worse off than it is today, the Jamaicans in Cayman will likely experience more unemployment and lower income, and the Caymanians in Cayman will regress towards the economic condition of Jamaicans living in Jamaica. In summary, the business model of a tax free jurisdiction is to remain tax free — and it will maintain a standard of living like other tax free jurisdictions. Once it ceases to be a tax free jurisdiction, it will tend to regress towards the status of other neighboring countries — in the case of Cayman, that neighboring country is Jamaica.

  • NJ2Cay

    My Calculations were off by one digit, lucky I don’t work in the financial industry.

    Here is a more accurate example by a CayCompass posted called Sonic…

    Take 1000 from 20,000 expats would yield 20 Million so it needs an average 2,500 per expat.

    If we don’t pay on the first 20k then that would need an average expat salary of 45,000 – The average UK salary is equivalent to 27k CI so that still doesn’t work.

    Add 50,000 ‘Caymanians’ and the per taxpayer drops to 700 plus change so an average salary of 27k which might appear to work BUT there are Kids and Students as well as retired, disabled and so on – NO still doesnt quite work – But if Bush says he’ll raise 50M from taxes it shows he doesn’t have only expats in the cross hairs

  • anonymouos

    A Travers is only scaremongering the man is also an expat what do you expect.

    James Bovell is also lying about 10 deals fell through!

    THAT IS NOT ONLY SCAREMONGERING BUT IT IS BLOVIATING AND OUTRIGHT LYING!

    just to help those who want to disobey the law.

    THER IS ONLY ONE PREMIER, HIS NAME IS MCKEEVA BUSH!

  • anonymouos

    Of course James Bovell of CIREBA is lying. Every year for decades in every country of the world, between late May to September/October there is almost no absolute sales going on. Its the “Dry Season for real estate” the premier knows this he’s in the business so you are not hoodwinking him I’m afraid. neither me. So stop telling lies to get out of paying a simple l0% tax.
    Also most real estate agents take vacation that time of year. Monies are spent on tuition, for college/university, and vacation, school books etc. You guys have no pride.

    How can we trust you if you tell such blatant lies. You should be ashamed of yourselves.

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