Cash take on tax will be low

| 30/07/2012

a_few_coins_in_a_mason_jar_42-18365079.jpg(CNS):  Since most work-permit holders are on very low pay and the number of significant earners on permits is small, government's hopes of collecting as much as $50 million from its proposed new tax on foreign workers’ incomes are unrealistic. The independent member for North Side, Ezzard Miller, said he believes the premier would be unlikely to raise even half of the targeted figure with this controversial tax. Using government's own statistics from a combination of sources, such as the National Assessment of Living Conditions, the ESO's labour reports and the latest census, more than 11,000 non-Caymanian workers earn under $2,400 per month.

It is estimated that less than 8,000 people would fall into the tax net that the premier hopes to throw around foreign workers to extract a 10% tax from their earnings. Experts have already indicated that many of these workers would develop lawful schemes to assist them in evading the proposed direct tax, especially those at the high end of the pay scale.

Miller believes that the premier would be left with less than 5,000 workers, most of them earning less than $4,000 per month, from whom to collect his tax and at most this would bring in under $24 million. Out of that government would be spending well over $1 million to collect the controversial tax as it would need an entirely new agency to assess and identify the tax payers and then enforce collection, making the tax entirely pointless.

The premier has stated that this so-called "community enhancement fee" is the “softest option” compared to other tax proposals, including valuer added tax (VAT) or property tax. Although the direct tax on expatriate earnings does not target voters, it is the most difficult tax for government to collect as there is no infrastructure in place to collect payroll tax, which many experts say would be avoided, both lawfully and unlawfully.

The government has to face the fact that it is attempting to charge a type of income tax in a country awash with lawyers and accountants who specialise in creating products that lawfully enable people to avoid paying tax on the money they earn or own. Coupled with the cost of collection and enforcement, genuine lawful tax avoidance would be a difficult issue for the Cayman government to criticise, given the basis of the country’s main economic pillar.

Other taxes, such as property tax or VAT, might be easier for government to collect as there are systems in place that could facilitate collection.A tax on pay would require the introduction of new infrastructure, not just in the public sector but in the local business community as well, as employers will be charged with taking the 10% from their employees and then passing it on to the Treasury.

Miller has said that government could collect around $25 million far more easily by taking 2 cents on the spread charge for $CI to $US exchanges without putting in any systems and certainly without causing so much controversy and challenging the entire economic structure of the country.

The premier has not yet confirmed the suggested estimate of around $50 million for this new tax proposal nor has he given any details on how government would collect the cash. As the purpose of the revenue is to help balance the 2012/13 budget, government will need to move quickly to begin collecting the money but with no process in place it could be many months before it begins to see any cash.

Furthermore, there are indications from the governor’s and deputy governor’s office that the budget and the so called "community enhancement fee" are far from settled.

Questions have also been raised about the discriminatory nature of the taxation posed by the premier, and while the constitution may provide for it, the UK may not be willing to support this approach.

A public meeting planned by the premier at Mary Miller Hall in George Town Monday evening at 7pm has now been postponed. The premeir will now be meeting with the public in West Bay on Wednesday evening.

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Category: Politics

Comments (16)

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  1. Anonymous says:

    I read the news every morning on this and two other local sites. Its depressing.  I get so angry, I feel like I am in a room full of people screaming and no-one even looks up.  I don't understand how my little home has become such a negative place.  I don't trust any, not ONE, of our leaders and I resent our Governor who just sits there waiting out his time.  All we do is talk, argue, name call, complain,moan but nothing changes, nothing happens.  I was born here, I remember when many places were just bush and greenery.  I watched West Bay Road disappear from my view.  I sat back and allowed fancy hotels and condos tell me I was not allowed on their beaches.  I endured private school where I did get a sound education but was told every day how black I was by 5 year old white kids when I had not been raised to recognise difference between colours.  I am old enough to remember when we went calling around to our neighbours' homes but still young enough to remember when the old Airport was upgraded.  I feel so frustrated because I sit back and consider that since I am educated, have a decent job and life that its ok.  What happens out there doesnt affect me, but the truth is it is breaking my heart and I don't know what to do or who to believe.  I don't see one single person in my community who I can trust genuinely loves this country and not just what it can do for them.  I think often I would do it, be that leader be that person who isnt interested in just money and power because I genuinely don't want those things, but will anyone listen to me?  Will anyone believe in me?  Will people just judge me because I don't come from money or affluence.  I had a troubled childhood and spent my teenage years being reckless.  Will my people love and accept me as a leader who just wants her little country restored to being what it was, a hideaway, a tiny little set of Islands where time stands still and everyone looks out for each other.  I want to speak out so badly because I love my fellow Caymanians but I also love the expatriates who make Cayman their home and I hate the divide created between us.  You don't feel comfortable in my world and I don't feel comfortable in yours and I want to break that wall down.  Many may think I sound crazy or have rose tinted lenses on, I don't I am just tired of the direction this country is moving in and I want to make a change….I just fear that the very people I want to help will not accept me if I don't grease the wheels and do favours.  I'm afraid my lone voice will be silenced by a bunch of grown men who make decisions based on their hatred of each other and not based on what is best for this country.  I won't leave though, many are threatening to go.  I will never go but I just wish I could do SOMETHING.

  2. Anonymous says:

    The ever classy Premier of Bermuda must be smiling to herself this morning.

    Has anyone ever noticed how similar the logo for our Office of the Premier so similar to that of Bermuda’s? (smh)

  3. Anonymous says:

    Well, my employer had a staff meeting and advised that under better economic circumstances, he would happily increase his work-permit staff's pay by 10% and continue payingthe pensions (despite Government's proposal that pensions would not have to be continued for foreign workers), just so that his employees would not be adversely impacted by having disposal income subjected to further strain in the face of ever increasing cost of living.  He cannot conscientiously deduct tax when he knows we can ill-afford it and would rather pay it as the employer.  However, in these harsh economic times when the business has already experienced losses due to a lingering recession and has already paid out ever increasing duties, health insurance premiums, electricity, utilities, permit fees,  etc, and over the past 3 years has already cut way back on operating expenses to ride out the recession, he cannot afford to increase his staff's pay to offset the tax deductions.  This is like a final nail in his coffin for his business.  He realizes he will lose specialist skills as he will not be able to afford to increase the pay, nor can he afford to lose specialist services which will be a death knell to his business.  He realizes that neither can we, as staff, take anymore hits ourselves in the face of ever rising cost of living, as we have already tightened belt by not having had a raise for over 3 years to keep up with cost of living, and in some cases volunteered to take a small paycut to help our company ride out the harsh times, helping in our own little ways as employees to find areas where we can help to reduce operational costs by cutting out wastage or finding more efficient or productive ways of doing things, simply because we know there is a truth to the saying – if our employer does well, we will do well.  And for the avoidance of any doubt, this employer is one of the best employers on island, with no black mark against it at the labor board or immigration board, no reports or complaints of any worker abuse – whether local or foreign – simply put, one of the best employers to work for as ALL are treated well and not exploited like some are on this island.  So I guess both employer and employee are now in the same boat – we all will be out of a job / business soon, whether expat or local, doesn't really matter – we are now all affected.   And you have your own government to thank for that.  Thanks Cayman, it was nice knowing you. 

  4. Anonymous says:

    Robbing Peter to pay Paul, in other words, is how my grandma would sum up this latest idiotic proposal of Government.  What really is going to happen, is employers who wish to retain good employees will offer to pay the 10% tax and still pay pension contributions for them, or alternatively, lose that employee and watch their business suffer when valuable skills and experience migrate to a more welcoming country who might just happen to be a competing jurisdiction to Cayman.  Either way their business will suffer – they either have to pay up and lose more income in a harsh economic environment where hardly any business makes money these days , or lose their workers' invaluable services when they have to resign because they can no longer afford life in Cayman, which in turn means hardship for the business that loses these workers.   So either way, the private businessman loses all around, for the sake of feeding the welfare monster.  

  5. Anonymous says:

    Cost of fuel to fill my car each week – CI$25.  Cost of nice dinner for 2 out on the town in nice local restaurant – CI$75 – $100, if trying to impress the little lady.   Cost to private sector employers for breaking legally binding employment contracts with employees by implementing Government's proposal (if passed), to discontinue pension contribution benefits promised to employees and commence deductions of 10% from their employee's pay to pay Government's coffers instead – PRICELESS.

     

  6. Anonymous says:

    The dictator has retreated to his stronghold of West Bay where his regime has the most support.

    Alas, it will be to no avail.

    We, Caymanians and guest workers alike, are united against the discriminatory and tyrannical rants of this regime as it snorts and flails slowly imploding into nothingness; each successive failure magnificently overshadowing its predecessor.

  7. Anonymous says:

    Really – Property tax?

    Oh, so I guess Stamp Duty will become a thing of the past? Or would the plan be to still charge a Stamp Duty Tax at the time of closing and then a yearly property tax?

    Kiss foreign buyers/investors GOOD-BYE.

     

    Really – VAT?

    Oh, so I guess duty will no longer be charged? Or would the plan be to double tax again?

     

    I'm interested what has been happpening to the 4 cent spread for all these years.

     

    Good grief – this place is expensive enough – just reduce Government spending and stop trying to rape the people.

     

     

     

     

     

    • Anonymous says:

      Oh well one way or another the government will have to gain sustainable income, the realities are cut spending or increase costs to the citizens.  This trying to please everyone is going to put Cayman in the position of the story of the man and his son that was taking their donkey to the market to sell and we all know what happened in the end.  The two fools listened to everything that everyone said and tried to do it and in the end they lost the donkey.  If our leaders don't make up their minds as to what they intend to do about the budget they will soon loose this country just you wait and see.

    • Anonymous says:

      Well, so much Stamp Duty is waived that that might as well not even be in place.

  8. Anonymous says:

    McKeeva's retreat into his stronghold of West Bay might backfire on him. There may be less people protesting in West Bay, but when they look at the faces of the people who will be getting their hard-earned money, undoubtedly their determination to fight to keep it will be redoubled.

  9. Anonymous says:

    Bush cancels the meeting at short notice; lack of preparation or chickening out? He should meet with the unhappy people. Or is it a plan, to get everyone driving round to lots of cancelled meetings, running  up fuel bills, so he collects duty on the fuel wasted?! LOL.

    Seriously though, that's a disgrace, as is 11000 people on less than $2400. I thought slavery was abolished.

    • Anonymous says:

      On the books slavery was abolished but in reality it was replaced by indentured servants the kind that Cayman has allowed to happen and continues everyday.  No wonder why his country is going to hell in a hand basket and the middle class is soon to be a thing of the past.  This is exactly what happens when greed takes over, welcome to "Third World" status people welcome to "Third World".  As expensive as these islands are no expat  working here should have an annual salary of less that $24,000 with such low wages it will only breed problems for the society and we see it happening everyday. 

  10. Anonymous says:

    Hah! Typcial McKeeva. Talk first, think second.

     

    Hmmmm, Maybe it is talk first, spin second, backtrack third, talk forth spin fifth…..

     

    Cheer up. There is an election coming up.

  11. Anonymous says:

    A brand new, fully staffed tax department will be many orders of magnitude more than $1m! Mac could spend that on hor's deuvres for the launch party.

     

    They pay more than that each MONTH to just subsidise the Turtle Farm.

     

    'If the tax is $24m I'd say it will probably make a loss, which is why we all know it won't stay at 10% for long. Even 20% won't be enough based on Miller's numbers.

     

    This whole idea is so full of holes I'm starting to think even Mac isn't taking it seriously.  I think he's just softening the voters up for some spending cuts by threatening to ruin the country.

    • Anonymous says:

      Had to shake my head a couple years ago when the then Boatswain’s Beach, same thing, sponsored a Miss Teen contestant. Now, how much was earned from that, I wonder.