Regressive taxation & small business: a tale of woe

| 27/07/2010

Successive governments in the Cayman Islands have sold to the populace thatmuch of the success of islands is based on its indirect and highly regressive tax system. Given the Anglo-Saxon predisposition to measure “success” in terms of aggregates (GDP and conspicuous consumption patterns chief amongst the favoured measurements), they may well be correct.

Empirical data from diverse societies across all continents lend strong support to the view that a regime of regressive taxes (fee based levies, Value Added Taxes, etc.) substantially favour the rich and big businesses and unduly punish the middle and lower income groups and small businesses.

The Cayman situation is made ever more inequitable by the fact that the penalized groups account for the vast majority of the local populace, whilst the favoured groupings are in the main comprised of transients and convenience domicile seekers.

I would like to offer an insight into the small business operation I have been responsible for over the pastten years to fully demonstrate how the favoured taxation structure inhibits the growth of small businesses, particularly in the much vaunted financial service sector.

The company in question, Financial Integrated Services, is a locally owned and operated financial services company, geared towards the provision of a range of financial services to lower income clients and small businesses.

The most recently introduced regressive tax is directed at the relatively small remittance business (the levels of remittances effected through the licensed money services is less than 2% of the remittance activities of the banking sector).

In the case of FIS, the AVERAGE MONTHLY GROSS REVENUE generated on the remittance activity is in the region of US$100,000.00. Over 75% of the GROSS REVENUE is transferable to the principal, Moneygram, which provides the service’s global reach.

The GROSS REVENUE generated at the local operational level is in the region ofUS$25,000.00 per month. The Monthly Tax levied by Government on the local operation and its clients is 160%, yes a draconian 160% of the Gross Revenue generated to the local business. Medieval princes would indeed be envious of such an arrangement.

On the aggregate Gross revenues generated by the business, this equates to a tax rate of over 40%. The other 98% of the legal remittance business conducted through the commercial banking sector is in the meantime totally exempt from any fee levy/ transaction taxes. Not unsurprisingly the business is slowly migrating to the tax exempt banks.

The punitive nature of the tax regime extends to the other areas of the subject operation. The operation’s accounting function is geared to providing accounting support services to small business.

There can be no denial that in the modern environment small businesses if they are to be afforded the opportunity to grow and advance have to have reasonable access to affordable accounting services.

Work permit fees, which is the primary tax in this segment of the business, is $10,000.00 per accountant. The average charge-out rate for a big four accountant allows for a cost recovery rate of the attendant annual work permit fee that is at least three times as fast as the charge out rate that is tolerable at the small business level.

The picture is the same in the insurance segment of the business. I dare say that this picture is very much the reality for small businesses across the spectrum.

The particular irony of the specific case of this company is that all concerned have sought to structure the operation with a view to seeking to deliver the greatest possible economic benefit to the domestic economy, hence the staffing complement of 20 is comprised of 15 full time employees, of whom only two are work permit holders, and three of the four part time employees are active retirees, the other two being tertiary level students. The demise of the company would have a much greater lasting negative impact than in a case where a larger proportion of the work force were transient.

The tendency over the years has been for ordinary folks to presume that the regressive indirect tax structure that has been the mainstay of the fiscal policy of every government for the past 30 years is vital to the ongoing economic success of the country. Arguably the current tax regime serves mainly to preserve the “natural order” of our established trickle-down society.

We must challenge our leaders to show how the perpetuation of policies and incentive structures that favour transient activities and penalize domestic ally generated initiative can in fact be to the long term benefit of the citizens.

Case in point: How do they equate pronouncements by vested interests of the so-called successes such as of the listing of 7.7 billion of CAT Bonds on the on the Cayman Islands Stock Exchange, (ostensibly ascendancy to a global leadership position) in the period since the start of the global financial crisis, with the fact that its owner – the government – is having to cover the deficit on the backs of its heavily laden core of middle and lower income residents and citizens in its futile attempts to cover a comparatively modest deficit of under $100 million?                                                         

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  1. Anonymouse says:

    SoAndre! Who am I to believe here? You or all those who have countered your Viewpoint????.

  2. whodatis says:

    Wow.

    Some of you people never fail to demonstrate the jealousy and arrogance that exist deep within you.

    Why this emphasis on property taxes?! That is the last thing I would want to see introduced into this tiny nation.

    There is something in the psyche of the greater western world that is inherently predatory and unrelenting. Why can a man (or woman) never simply, comfortably and out-rightly OWN "something". Be it a house, lot of land, office building … ANYTHING?!

    My parents and many of their peers started from absolutely nothing and basic levels of education and worked their fingers to the bone (often manually – not pushing pens and keypads like so many individuals on here) and managed to attain "stuff" that they can now proudly call THEIR OWN. (We all know the horror stories of retired American and British folks who after working all their lives ended up homeless as a result of "property taxes".)

    Yet you people want to bring the government into this equation?

    No my friends – keep that blood sucking form of thinking back in the countries from which you came. We do not want that here in the Cayman Islands.

    My fellow Caymanians – I have said it before and I will say it again … many amongst us simply hate to see any evidence of us Caymanians enjoying any degree of a better situation when compared to what they are coming from. Furthermore, any proposals on our part that questions or challenges their status quo will most likely be shot down for as even God in heaven above is aware … they are the know all, end all and be all of all things governmental, economic and administrative.

    This is all clearly demonstrated by the ongoing global recession that was initiated, nurtured, hosted, promoted and executed in their own front yards.

    The modern western approach to government and economics has failed miserably as they have instituted a predatory system – one which many wrongly assumed was designed for individuals other than themselves. No my friends – this current global downturn was dependent on the preying upon of the middle class of the western world. This should surprise no one as the entire system reeks of a ridiculous gigantic, bubble-licious ponzi scheme.

    By the way, do we realize that the region currently fairing the best and pulling out of this global recession is none other than AFRICA?!

    Of course this is not to praise them for their sound strategies of economics but it demonstrates just how far from reality the west has traveled in this regard.

    Africa is the richest region of the world in terms of natural resources – such realities will be the true driving forces on the other side of this global downturn and into the future. Real and true commerce! Not non-backed worthless paper fiat currency, derivatives, manipulated housing markets, corrupt ponzi-scheme crazy fat cat bankers, globalization, job outsourcing etc. etc. etc..

    For some individuals to continually hoist themselves upon the soapbox and bellow out the same played out rhetoric is nothing short of madness … arrogant madness as well – the worst kind there is.

  3. Anonymous says:

    taxes..fees…service charges…call them what you like….

    please  dig up the miller-shaw report and read it out loud…. maybe then you will understand what is crippling the economy……

    the inefficent, over staffed,overpaid, under worked cayman islands civil service!

  4. Anonymous says:

    Too simplistic. Andre, Andre, Andre…

    XXXXX

    Your treatise on regressive taxation follows the classic textbook treatment on the subject. It goes something like this: "A regressive tax is a tax that applies equally to everyone, but that takes a smaller percentage of income from the wealthy and a larger percentage of income from the less wealthy."

    In truth, the classic textbook definition is a silly oversimplification of the subject and so it Mr. Iton’s article. He would lead us to believe that in a regressive tax system the rich effectively do not pay their fair share and the poor pay too much. That is pure tripe!

    I am not poor by any means but I am not wealthy either. However, I am frugal with my spending. I have fabulously wealthy acquaintances and I never feel as they do not contribute their fair share to the government coffers when compared to my contribution. Why do I say this? Let’s take a look at things with "reality glasses" on.

    What is seldom considered – maybe because it is not exactly politically correct – is that the less wealthy are a larger burden on the system than the rich. (Since when did I give a tinker’s damn about being politically correct?) My children went to government schools and cost the CI government a lot of money to educate them. My more well-off friend’s children went to private schools. The poorer classes apply for government scholarships. The wealthy pay for fancy universities. I use the government hospital and dentist. My rich friends go to Miami.The poorer class are usually less healthy and a greater burden on the healthsystem. The poorer class are a larger burden to the social services system. The poorer classes are responsible for a large percentage of crime, costing more in police personnel, enforcement, and prisoner housing. The list goes on but you get the picture. Per capita, the poor cost the government more hard cash than the rich. The system is fair.

    Looking at a comparison that I know of personally: One of my more well off friends pays around $2000 per month for CUC, over $200 per month on water. I pay about $60 per month on power and maybe $50 per month on water during dry periods. His grocery bill runs about $150 – $200 per week for the two of them.Our runs about $80. For example I will buy "strore brand" items. He buys the top brand names at about twice the price. His weekly entertainment bill runs between $100 and $200 on restaurant food and drinks. Mine runs about $50 per week at the extreme. He buys a new automobile every five years. I go 10 or more or buy a used vehicle. His vehicle costs on the average almost twice what mine does. He buys the latest new electronic goodies: A $2000 flat screen TV. I settled for a $500 dollar one I bought used. His newest computer was a top of the line Dell he bought for about $1600. My latest system is a factory refurb unit not that far removed from his I got for about $500. His home cost about three times what mine did. Ditto for his furnishings.

    Summary: My friend "indirectly" pays: Five times the "tax" on power; four times the "tax" on water; over twice the tax on groceries; four times the tax on entertainment; about three times the tax on vehicles; maybe three times the tax on gadgets and appliances; and three times the tax on housing. But he does not make any more than around twice or so my salary. He like most of my more well of friends contribute a much larger percentage of their salary to "tax" than I.

    The fact is that the wealthy are much more liberal with their spending and buy more luxurious and higher quality (more expensive) goods. They put more money into the economy and contribute to the multiplier effect. Since our regressive tax system taxes on what one spends, he who is more liberal with their spending pays more tax. I think it is a fair system for a capitalistic society.

    I see similar situations all around this country with people who make good money and spend at near the limit of their budget. I have no problem with the regressive tax system. The primary way government gets any of my money is if I spend it! If I chose to do so I could grow or fish for most of my own food, install a solar electric system, ride my bike more,and eliminate some luxuries and government would be getting very little from me to waste. Every dollar I earn is MINE! I can choose to spend it, or I can choose to save it. However, I despise the idea of an income tax whereby government claims a set percentage of my hard-earned money and I have no choice but to pay it.

    Same goes for property tax. I no longer owe a mortgage and I like knowing my land and my house are MINE! "They don’t eat no bread" as some say. I DESPISE the idea that every year a bloated and wasteful government would be stretching forth their greedy hands and demanding excise from my property. NO DAMN WAY would I support that!

    I am a dyed in the wool capitalist! I came from humble beginnings and carved a fairly successful life here in this regressive tax regime. Mr Iton whines about the hardship he is suffering.

    Let’s ask Andre some questions about that "hardship": Do you still use air conditioning in your house? We don’t. Hot water baths? Us: Nope. How old is your primary vehicle? Ours is about 10 years old. Ever buy clothes or household items at a thrift shop lately? (It is good financial stewardship as it contributes to needy causes, AND you can save a BUNDLE over Miami mall prices on some great stuff!) Ever get your weekly grocery bill to $40 per person or less?

    The truth is that far too many people babble about having it hard but do not face the reality that the bubble was a bubble! And for the time being the bubble has burst! For some, the Cinderella existence is over; the mice have turned to footmen and the coach into a pumpkin. But some cannot or just simply do not know how to cope with a regression in their lifestyle. I fully acceptand even embrace the reality that I cannot now expect to sleep in a 70-degree bedroom, bathe in 100-degree water, eat steak more than once a month, leave the lights on all over the house, shop for a new wardrobe every season, be embarrassed about being seen shopping at yard sales and thrift shops.

    I have faced the harsh reality of the times and consider myself a winner because I am no less content with life now than before the economic meltdown.

    Andre, start by putting your "reality glasses" on, turn off your A/C, turn down your water heater, turn off the shower when soaping up and but a water buy cheaper groceries, shop yard sales and thrift shops, cut the cable or satellite TV, get rid of the land-line phone at home and the Blackberry. It would be a start and you will probably be

    Sure times are hard. But, "When the going gets tough, the tough get going!" The flat economy probably cut my business income by 50% – 60% but I am not whining. I have begun to rework my business plan to capitalise on the current economic situation. We found ways to save we never even dreamed of before! I will take what I learned about thrift with me and when (and if) things get better, I will be a better more appreciative more resourceful person for it.

    The fact of the matter is that even my austere post-meltdown lifestyle is fabulously wealthy compared to a large percentage of the world. I have running water, indoor plumbing, a motor vehicle, electricity, a built house, a closet full of clothes and shoes, access to a doctor when ill. I do not have to hunt for or raise my meatkind.

    Under the present system, government gets their cut once and that’s it! I paid stamp duty on my house lot and duty on my building materials. Once. Until I build another house their tax cut on my residence can never increase. Most importantly what I earn and what I own is mine, and as it is now, no one now has any right to demand an annual ad valorem tribute from what is mine!
     

    • Anon says:

      Wow. That was pretty impressive. Insightful and well written. You sound like someone who should be earning a lot more.

    • Anonymous says:

      Right on brother ! How about this put a five dollar a gallon tax on fuel, and remove every other tax fee and duty in Cayman, That tax will raise 500 million dollars a year and our economy would explode with new business and investments, the goverment will shrink by half and all the people will be absorbed into the exploding private sector. Voila !!!

    • Karyll Iton says:

       Bravo.

       

      Your counter arguments were VERY well written. I must also admit that it is a perspective that I would have never looked at the regressive tax argument from. Before I go any further I should identify myself. I am the son of the author of the article. Andre is my father. So there are some questions you asked which I know my father would never respond to but I thought they needed to be answered.

       

      1. Do you still use air conditioning in your house?  No he doesn’t. As a matter of fact my father honestly perplexes me because sometimes even when it is hotter than the devils kitchen, he still refuses to turn it on. Even when I bring his grand kids there! It’s not that he can’t afford to either, but it is because he strongly believes in controlling costs.
      2. How old is your primary vehicle? 2002 Toyota Camry. Again, I wonder why my father never treated himself to a Benz or a BMW but his argument was that the Camry got him to the same places that a BMW would have.
      3. Ever buy clothes or household items at a thrift shop lately? No. Daddy is too stylish for that. But at the same time he taught me a lot about looking for deals. Sure you can buy nice shoes, but why not wait until they are on sale and get them at 20% off?

       

      As for whether my father bathes with hot water, that is for him and his shower to know. My point by bringing up all of this is that the questions you asked Andre to ask him self, he has long since done so.

       

      Now here are the things that make no sense about your argument. You based your WHOLE premise of the spending habits of the rich on a single wealthy individual that you know. The law of large numbers says that one person cannot be a representative sample. As a counter point, I know individuals that make $10,000 a month here that live in the exact opposite way your wealthy friend did. They spend nothing here and remit everything back “home”. Should I base my entire tax plan on this one individual? How does regressive taxation see that individual carrying his fair share of the tax burden? How does the government accurately plan for such tax income? The same way they have been; and that left us with a 9 figure budget deficit.

       

      See I feel your pain. I wouldn’t like income tax, or property tax or any other form of tax for that matter. However, I recognize my social responsibility requires that I pay my fair share. That is what this is all about. Want some numbers? Ok, simple example. Customs duty is the perfect example for this. If two men bring in the same $10,000 car, the duty on said vehicle would be $2,950 (not including the other fees). For a man making $29,500 annually that represents a full 10% of his income. But for someone earning $100,000 annually, that is just about 2% of his income. So the person earning 4 times as much contributes less than a ¼ (by percentage) towards the running of the country.

       

      In the end, your arguments champion a system which is already in place and has obviously not worked. Andre Iton has provided employment and opportunity for many a Caymanian for decades. He and I rarely if ever see eye to eye, but before I try to criticize his position I aim to try and do even a tenth of what he has done for our country and our people. At least he is proposing an alternative solution, something most people never do. 

  5. Tim Ridley says:

    A properly constructed CSC would include appropriate bandings, categories and exemptions. And thus protect against the risk of poor families being deprived of long term land holdings. Swiss farmers are also land rich and cash poor  and yet their society functions extremely well with an annual property tax.

    I await with interest a viable solution to solve the toxic landfill without taxpayer contribution. But I fear this is indeed a pig that will not fly without subsidy! 

    • Man says:

      Now you have to divulge "nuggets" of info like those exemptions rather than "bait" people into a trap!

      So let me see if I can make this pig fly!

      Approve the CUC application before Planning to install an incinerator to burn its waste oil and convert to electricity. Set as a condition the conversion of Mt Trashmore to electricity. CUC is a very community focused company and will cooperate as they will also earn a profit doing so! Charge them a fee for the trash used to burn and convert to electricity.

      Institute a National recycling program with penalties similar to the Supermarkets bag program.

      Use the "profits" from your metal recycling program to fund the chemical treatment of the toxic landfill over a specified period (10-20 years) as the incineration reduces the amount of existing trash and disposes of daily pick-ups. We will also realize a reduction in operating expenses as a result of recycling program and a "one" location pick up for some neighborhoods rather than house to house stops. Of course we can "sweeten" the deal for the residents that transport their recycled trash to the "neighborhood" dumpster.

      Are we flying! Or am I just dreaming and full of it?!!!

  6. Anonymous says:

    Here is what Tim is conveniently omitting. The Caymanian people are property “rich” and cash “poor”. A property tax will force them to sell their property further improvising them. The foreign and wealthy property owners will continue to be protected by this fact. Government needs to divest of all of its owned and operated businesses, they are being subsidized annually by tax payers, not because they are incapable of being profitable, because the political hiring practices and bureaucracy prevents them from being profitable. The divestment of these businesses will immediately reduce the Governments operating expenses. Tim, the solid waste can be reduced and managed at a profit without taxpayers dollars, I suspect you are no longer “hungry” enough to see it!

    • Watler says:

      We need a tax, but not property tax!

    • Loopy Lou says:

      Nonsense.  How can realising a valuable asset be impoverishing anyone?  This is a terrible excuse.  Land is a valuable resource in an island and failure to exploit value is harmful to everyone in the economy.  Cash poor land rich? Sell up and do us all a favour.

      What you really mean is that many are greedily holding out for the day that DART wants to buy their land.

  7. Anonymous says:

    A generally excellent mature debate on this thought provoking article.

    But the least we deserve is some input – argument either for or against the equally valid points everyone is making – from the politicians?

    I am going to hold my breath until we do. Here goes…

    • Man says:

      Impossible! This level of debate is above the comprehension of the 15 elected members!

      Our consumption based tax is equitable, our human capital development is very limited, our ability to attract private investors in infrastructure is not being realized, the growth in demand from our citizens for a free ride is the main driver of increased taxes, the "Caymanian v Expat" crap is preventing us from leveraging the high human capital that exists in Corporate Cayman.

      And I agree, Caymanians are property "rich" and cash "poor" so a property tax will be devastating.

      As to "we need a tax", no we do not, we need less tax and a smaller Government filling the role of regulator either made up of individuals that understand the business environment or with persons having the ability to take advise from the experts. The Government needs to divest of its businesses and Govern.

       

  8. Dagny says:

    It is not often when someone’s ill-formed attempt at logic creates such a complete circle of irony, but Mr. Iton manages to accomplish this seemingly impossible task with some degree of beauty. 

    He is seeing his current clients moving to a tax exempt company because of new fees imposed by Government (tax) on his services.  He believes instead that Government should be taxing ‘transient’ business more than domestic businesses and I don’t know how he does it, but he fails to see that the result is the same.

    Transaction taxes are amongst the worst of all taxes.  They work only to decrease the number of transactions, which is what Mr. Iton is now seeing in his own business.  However, his thought that "the rich guys" would be or should be willing and/or able to absorb any additonal transaction fees is ludicrous in its naivete.   They would interpret a new tax in exactly the same way that his customers have and in a market so fragile in its mobility, they pick up and go to where it is cheaper (i.e in Mr. Iton’s example, they go to the tax exempt bank, or you could take the example one macro step further and say a no-tax jurisdiction).  This succinctly answers Iton’s question of what benefit is afforded by our current financial services sector and indirect taxation regime – if there were higher taxes on the ‘transient’ business, there would be no more transient business.  It is really quite that simple.  Not only would his 20 employees be looking for work, so would the everyone in the financial services sector and as a result the vast majority of the civil service (since the sector contributes about 50% of Government revenue).

    Taxes aresimply productivity robbed out of the economy, and no matter what you want to call it (VAT, Property Tax or CSC) it all works out to the same thing:  Government will spend what it can (and in most cases more).  Increasing Government revenues only increases Government spending and since ‘the poor are getting poorer’ it would support my argument that bigger government is not benefiting ‘the common good’.  Getting rid of big government is the only way to fuel productivity and create wealth at all levels.

    I will also posit that one of Mr. Iton’s first mistakes was to "structure the operation [of his business] with a view to seeking to deliver the greatest possible economic benefit to the domestic economy", when he should have been structuring his company to seek the highest degree of profit for the shareholder – ie to run a profitable business shamelessly and without trying to hide behind some altruistic claim of being in business for the good of the ‘domestic economy’.

    • Dred says:

      Amen. Well said.

      Taking from the poor to deposit into the Government coffers only to have them spend it on more stupidity is just sheer well stupidity.

      Taxes do not help us at all no matter how it is dressed up it’s still taking money out of our pockets to give to a government who can not manage now what they are getting.

      The only ways to solve this problem is to downsize the government and transition those who are Caymanians back into the working world. I’m sure immigration will tell you they still get work permit applications which tells me there are jobs available for CIG employees to move to.

      To stimulate an economy you CAN NOT MAKE IT PAY MORE. You have to get people back into normal patterns and they can not do this paying more for products. They need to cuts duties on everyday items.

      What CIG needs to do is pull back the reigns on NEW capital projects for a year or two. Let the few that are already in the system complete. Downsize CIG and make heads responsible for efficiency. I know CIG is not a business per say but it needs to operate more like a business if ever the goal is to make more money than you spend.

    • Culture Saver says:

      Dagney, you had some good points in your response and this issue has many intricate angles that none of us can solve. As we can all tell by looking around the world, no one has quite figured it out. But your last comment regarding Mr. Iton’s mistake about running his business to benefit people in lieu of shareholders is exactly the problem in most societies today that leads to big government. The Friedman/Chicago School of free market economics has been hijacked by the corporations that have benefited from it. If business throw out all other objectives except making profit, it creates what we have today; shadow governments that are run by corporations, that subsidize the same corporations so that their shareholders see a profit, but at the same time hide the true ‘cost’ of their end products. This true cost includes creating poverty for the working class (that then needs government help), environment effects (with the bill picked up by government), and other socioeconomic effects.

      Classic examples are multi-national seed companies and agro industry. In trying to make the most profit for shareholders, it’s acceptable to pay high powered lobbyists in countries like the U.S. to pass subsidization laws for farmers (consumers of their product) which then flood the world market with fake food that inhibits world economies and presses places like Africa deeper into famine. If they instead tried to run their business in a true ‘free market’ they would realize that running your business to benefit the local economy is precisely what educated consumers want, and what is needed to provide for a stable economy.

      If CIGtook a better approach to reward business that focus on local economy, i.e. work permit fee reductions if the permitted worker is serving a capacity that directly effects the local economy vs. one that is on island but is doing business for customers overseas, small local business would be more successful and have a more viable chance to grow at a reasonable pace for the given situation.

      We have to rethink entirely how we put ‘value’ on things in our economy. Quit subsidizing (via directly or indirectly) big business and realize since Regonomics, trickledown economics have been statistically proven time and time again to not work. Does anyone really believe that it only costs the environment, governments, or societies in general only $4.00 for a Whopper. Ask the HSA how much unpaid diabetes treatments cost for the poor people who are forced to eat them as typical dinners, and they will tell you the actual ‘value’ is much higher as the socioeconomic costs are ‘trickled down’ to the tax payer by the corporation/shareholder.

      Preserving local culture and economies is the only way to a sustainable, fair, ethical world. It’s how it worked for tens of thousands of years before the new invention of the only for profit business model.

      If you want to cut government expenditure, which we all should, we need to look at the real causes and fix the system. The only people that think the system works are the people at the top, less than 2% of the population worldwide.

  9. Anonymous says:

    This article obviously wasn’t meant for me…

    But I guess I can’t say for sure since I got lost in the second sentence.

     

    Go ahead, make fun of me with your thumbs down

        :’o(

    • San Andreas says:

      It was’t meant for anyone other than the members of the Cayman Society of Small Businesses Owners With An Interest In Marxist Philosophy And Its Application In A Offshore Economy. 

      It is an elite club.

  10. Tim Ridley says:

    All taxes and fees can be increased (and reduced) by politicians through the legislature. That is how democracy works. The way to control politicians is through an alert and aware electorate that in turn elects mature and sensible politicians. The Swiss have property taxes that fund their local services and seem quite happy with them for the most part.

    A well constructed CSC, combined with the needed Government downsizing, could lead to a reduction in the current fees that are throttling the tourism and financial services industries and a reduction in stamp duty on real estate transactions. And, most importantly, help pay for the Government services we all need, that in turn support the value of real estate in Cayman.

    I repeat (without apology) that the biggest threat to real estate values along the SMB corridor is the landfill. Sooner or later my real estate friends will join the dots and recognise that a CSC is needed to solve that, and sooner rather than later. Anyone who seriously thinks that the landfill can be sorted out through privatisation alone at at no cost to the community as a whole is living in a dreamworld.

    • Dred says:

      You can dress that up anyway you want to Tim, pigs won’t fly even with RedBull.

      I agree with you on the downsizing CIG. This needs to be done in conjunction with new revenue measures. That is the way forward. The businesses and the people of the Cayman Islands simply can not handle anymore taxes be it direct, indirect or dressed up in their finest Sunday best. What we are doing is throwing gas on a fire by CIG adding taxes. In a recession you stimulate growth by pulling back fees especially on items like foodstuff to try to stimulate the economy.

      One thought should be towards trying to get the construction industry going again by possibly holding meetings with the Contractor’s Association and investors. I would ask for frank open dialog on what it would take for us to kick start their building again such as reduction of duties to construction material or fees.

      Here’s some of the problems that will come up: WORK PERMITS TOO HIGH. RED TAPE AT IMMIGRATION.

      Tim I see too much issues with CSC. What this does is buries the small man even deeper into the hole. Does it not alarm you yet at our levels of crime? Do you not realise the cost of living is a major contributor to increase crime in a jurisdiction? Why would you want to levy more taxes that hit the low income people?

      Okay. You want Taxes so bad let me throw this out to you. A special "I got @#@ and you don’t tax". Anyone making CI$100,000 and over annually pays 20% CSC. Hold on there’s more. The "I don’t get paid a salary but make dividends you idiot tax" of 20% on all you make from stocks, bonds etc if you make over CI$20,000 annually in this sector.

      How does that sound? I could think of more if you give me more time.

      Taxes in Cayman is simply not the way. We already have our taxes it’s called duty and everything we see, touch and smell.

      We need to start thinking outside the box as they say at more angles to generate money. We need to look at what we have here in Cayman in abundance and find ways to use it to our advantage. Things that come to mind are:

      Sun – 80% of the year we have sun light if not more.

      Sea – We have plenty of salt water around us and we have depth near us.

      What else do we have people?

      And NO to Refinery!! Not just no but HELL NO!!!!

  11. Anonymous says:

    The "regressive taxation" issue is a red herring. The real problem is  government’s wasteful spending.  If government was willing to reduce its waste of the people’s money there would have been no need for the new fees and taxes including the ones Mr. Iton complains of. 

  12. I love Ricardo says:

    Really? This business is aimed at those who wire remittances (transients) and those who need the services of an accountant (business owners).  it hardly is power to the Caymanian on the West Bay omnibus is it?

  13. Anonymous says:

    The numbers in your article make no sense, but I will not dwell on that. It sounds like you have a money transfer business and got hit with one of the new fees. I can understand why you’re complaining about that, but what is all the talk about work permit fees on accountants and about the Cat bonds? How does that affect you adversely if most of your employees are Caymanian? Are the expats you employ accountants? Do you buy or sell cat bonds? And what is the deal with the comment about Anglo-Saxons? Is that your code for the UK and the US? If so, would that indicate you prefer the "Continental" economic model (that’s code for the French and the Germans), or what? Do you think taxes on small business are lower in Europe or the US than here? How do you propose to tax "transient activities", since being transient they can simply go elsewhere? Hope you come out all right but based on the article it doesn’t look good.

    • Anon says:

      I dont get your Anglo Saxon comment either – how can this even remotely refer to a US model?  Surely you mean English or German?

  14. Tim Ridley says:

    Mr Iton makes a good point about the regressive nature of the current Cayman tax system. And he is right to say that the money transfer fee is wrong. He might also have made the useful additional point that the current fee based system is maxed out and is actually going backwards, discouraging a raft of business along the way, thus making the situation worse.

    But he does not actually then move to putting forward concrete solutions. We clearly need to cut the size of Government, unneccessary Government expenditure and  the benefits package enjoyed by the civil service. But we also need to rebuild the revenue side in a fairer, more efficient and sustainable way. Everything points to a community service charge tied to property. The fairness of the CSC is that it will require a contribution from all (Caymanian and foreigner alike) who enjoy the benefit of property ownership in Cayman. Right now the property owning classes are getting a free ride and they know it. 

    It would be very foolish if Cayman persists in pricing itself out of its traditional markets and revenuegenerators, tourism and financial services, because of the continued high fees charged to these industries. And yet remains unwilling to require a contribution from the one asset that cannot move from the Islands, i.e. real estate. Do we really want a situation where we have lots of expensive residences, office buildings and land whose owners contribute nothing,  and a Government that cannot maintain the roads and other infrastructure or provide security, let alone pay its civil servants? That smacks of a third world country not a sophisticated and thinking civil society

    • Anonymous says:

      Tim,

      I can agree that the current narrow consumption tax base, and in particular the duties system are in desperate need of an overhaul. However I am sorry to tell you but that the property tax horse died some time ago. Iknow it was your favorite horse but whipping it will do no good.

      If property is taxed, (that is what your euphemism CSC is all about after all), the value of property will go down by a corresponding or greater degree (given that just about everyone understands that once an annual property tax is introduced it will go from 1% to 2% to 3% to 4% to… ?%). Not only that but companies would have yet another disincentive to invest in or even maintain "bricks and mortar" here.

      The only real solution is for government stop its outrageous waste and to cut expenditure to meet the recurrent revenue available. No more taxes are needed. We need common sense cuts in expenditure.

      • Bodden says:

        lol… you can cut all you want.

        It still won’t be enough to run this country and ensure that the local people are being taking care of. This is where a "sustainable revenue measure" such as a tax comes in; the monies generated, can be used for our health, education, and social needs. Of course, certain rich folk don’t like tax because they feel that they made it to the top on their own. So "they" want to have us keep the same old Cayman Islands system in place; a trickle down of wealth system, where those below eat the crumbs from off their table.

    • Anonymous says:

      Tim,

      How many countries can you identify where a property tax aka "community charge" has not increased over time as politicians discovered that there was another source of money for them to waste.

  15. nauticalone says:

    Similar to how the Govt. charges a poorer person the same amount to license an economical and more environmentally friendly vehicle as it does someone to license any number of very expensive gas guzzler vehicles. eg; a Suzuki Swift  (at a value of $15,000) costs the same as a Bentley Azure (at a value of $350,000) or even a 2nd or 3rd expensive car would cost the same…rather than an increased amount.

    Hence the old saying "the rich get richer an the poor get poorer". And further social depression as Govt.s make it more and more difficult for the poor and middle class to "get ahead" or to start a business.

    This is seemingly because of a combination of "dont know" and "dont care"  or "greedy" and "short term gain" attitudes on the part of lawmakers and other leaders.

     

     

    • Dennis Smith says:

      An interesting approach but you are missing the fact that taxation in Cayman is consumption based and in the case of automobiles it is a progressive tax.

      The more you consume the more tax you pay, thus the owner of the Bentley Azure (at a value of $350,000) paid a duty 40% or $140,000 making its cost closer to $490,000. The duty on the gas sipping Suzuki Swift  (at a value of $15,000) is 27.5% or $4.125.

      Meanwhile the gas guzzling Bentley owner is forking over a ton of money in gas tax every time he hits the pumps. When you consider that his lifestyle is also is also extravagant (a relative word), his needs for services and additional consumption are also generous and his visiting friends help swell our restaurants and resort facilities. All of which supports employees and various small business. By comparison the poor spend as little as possible on the basic necessities that contribute little to our consumption tax system.

       

      • Anonymous says:

        The writer of this viewpoint often refers to "Anglo-Saxon" systems in a negative way.  I have repeatedly asked the writer to identify the heriditary system that he suggests we should consider following.  I ask again as i am all for a better alternative.

        To follow on Mr. Smiths comments – people generally spend according to their means and i do not begrudge the rich man fbecause his spending allows me to get a regular paycheck.  What i want is the opportunity to work and be as successful as i can be.

         

      • nauticalone says:

        Thanks for your reply. Though i don’t think i "missed the fact" you speak of. I well appreciate what you speak of in that someone who can afford a Bentley, can/will also spend much more that someone who can only afford a Suzuki.

        And that is exactly why i say that he/she can afford to pay a higher annual licensing fee (just like he/she paid a higher duty, that you speak of, and just like he/she pays a higher annual insurance fee). I was simply pointing out another prospective means of raising additional revenue. A means which most rich people will likely not mind either.

        I wouldn’t mind paying a higher licensing fee on my luxury convertible.