The difference between the customs tax and the sales tax is that the customs tax realizes only $22 on the landed costs, while the sales tax gives Govt the tax on the landed cost + the sellers profit.

The spreadsheet is therefore correct and you are incorrect. I suggest that you apologize to the author of the article for your lack of understanding and for your undue critism.

If you still dont understand just ask any seller in Cayman whether they calculate selling price based on only a part of their landed cost, or whether selling cost is calculated on their landed cost plus the import duty they paid…

]]>I do however wish to make clarifications of what were apparent misconceptions by some posters about my article.

I was not suggesting creating a new sales tax in addition to the customs tax, just replacing one with the other.

There are similarities between a sales tax and VAT, but there are also differences. VAT is more complicated from the seller’s point of view. The VAT tax is paid at various stages of production or distribution, and the seller with-holds part of the tax to offset taxes that he has paid and remits the balance to the government. The seller needs an elaborate accounting system to verify the value he has added and the amount he will withhold.

The seller collecting the sales tax must however remit all of the taxes collected to government. Any point-of-sale-system can do a printout to show what the sales were, and how much taxes were collected – a far simpler method.

Most posters seemed of the opinion that it is impossible for the government, the customer, and the merchant to gain financially by changing the system. If you examine the excel file closely you will see that it is actually possible for this to happen.

The seller invests less by not paying the duty up front, and while it is true if the markup rate is the same percentage then the profit amount for $100 cannot be the same as it will be for $122, but then remember that the seller still has $22 to invest in another product, and the total of $122 will bring the same mark-up amount if it has the same mark-up percentage. So that is correct.

Will the government get increased tax when the sales tax is paid – yes, the excel calculation shows that this is correct.

The excel file also shows that the customer will pay less and if you check all of the calculations you will see that is also correct.

Some posters strayed by pointing out that government is wasting funds etc, but the topic of the article was changing from one tax system to another, not government waste.

In any event, we see that our government imposes harsh taxes without any input from the public.

Thank you all for your input. If you have further questions or comments please email me at ari.greenwood@yahoo.com

]]>No, it doesn't change the total cost to the purchaser if the payment to the Government is upfront duty or sales tax. If the consumer has $200 to spend he can:

1. Pay $200 for something that duty has been paid on but no sales tax will apply to ($164 + 22% duty – $36 to Government);

or

2. Pay $200 representing $171 purchase price + 17% sales tax ($29 to Government)

The balance in each case is the cost (excluding duty) to the retailer and their profit. If those elements are to remain the same then the total price to be paid by the purchaser (including sales tax) can only go down if the payment to Government goes down.

The error in the spreadsheet is because the retailer's margin in the duty example is charged on landed cost plus duty whereas in the sales tax example it is only charged on the landed cost. So it's not actually the same as the retailer is charging a margin on a higher amount in the first case so they would actually be making more profit.

]]>You wrote:

Under Current Duty Rate the Sales Price is $305 from which the retailer pays landed cost of $100 and duty of $22 so nets $183.

Under Proposed Sales Tax the Sales Price Before Tax is $250 from which the retailer would pay the landed cost of $100 so would net $150.

Remember that the merchant has not paid import duties of $22, so his total cost is $100 versus in your first sentence his total cost is $122. So he has $22 left to invest in other products which, when invested will bring his total profit to 22*1.50 = 33. So he will earn $183 from $122 investment in any event. This makes your #4 incorrect, and your #1,2 &3 questionable.

It appears that you did not understand the article and the Excel spreadsheet.

]]>It is also sort of frightening of the loss of work-permit fees by Govt, loss of rental income by Caymanians, and general loss to the economy that will result from Govt taking this route…

This is much worse than replacing import duty wth a sales tax…

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Payroll tax is a bad idea too for many of the same reasons.

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