Community enhancement or division?

| 01/08/2012

Handing over more money (in the form of tax dollars) to this government feels a little like asking a crack addict to mind your money and expecting it to be put to good use. This may sound a little dramatic but until we are told what the government proposes to do in order to tighten their belts and curb their spending, the people have to be opposed to handing over any more money — all people, expats and Caymanians.

As much as we can all agree that the premier’s proposal is constitutional in that there is a provision to allow discrimination in the matters of immigration and taxation, we all have to ask ourselves is this really the most sensible solution.

Sadly, whether this goes ahead or not, what’s been said cannot be unsaid and this has become a very divisive issue — interesting therefore that the proposed tax is to be called “Community Enhancement”.

There are many people, expatriates and Caymanians, who would welcome the opportunity to provide positive ideas in an attempt at finding solutions to the predicament we find ourselves in. Many people (myself included) are angry because there really is no good reason that we find ourselves in the position we’re in — we got here only because of ‘our’ greed, arrogance and perhaps ignorance. We had rainy day money that we spent on sunny days and here we are.

And yet, despite feeling that I had no say in how we ended up in this position of poverty, I am absolutely prepared to tighten my own belt in order to help us get out of this but I want to see our leaders leading by example; it’s simply not right to expect everyone else to tighten their belts with no intention of doing the same.

I saw a bumper sticker once that said, “How can I be broke when I still have cheques left?” and I believe it’s time to take the cheque book away and get ourselves educated as to the actual position we’re in — no more clever accounting, just the facts. 

We have some brilliant minds here and it’s time the government acknowledged the expertise of these brilliant minds and formed a sensible group of people who might actually have some ideas to get us through this without the need for direct taxation and without the divisiveness that we’re currently witnessing.

Category: Viewpoint

Comments (35)

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  1. datisme says:

    What happens to a country that is ruled by a third world fifth grader?  Just keep watching.  Cayman is failing and will continue this path until it reaches its limit to borrow enough to survive.  O wait.  Too late for that.  Now we just watch it die a slow well deserved death.  Not to worry for those with the smarts to survive by themselves will end up the new owners.  Those who have no marketable skills will clean houses and work in the yards in Jamaica.

  2. Anonymous says:

    The payroll tax idea is completely idiotic for so many reasons.

    Not only is it unlikely to raise any money, the litigation surrounding it is likely to cost a fortune.

    if the government were ever to try to enforce anything of the type that the Premier has announced so far, the litigation would commence to prevent that enforcement and government is likely to find itself in a position of having to pay out millions in damages to settle claims Does anyone remember GLF and the millions paid out for that settlement? That is peanuts compared to this mess. We should not be relying on the Premier's legal qualifications any more than we rely on his finance qualifications.

  3. Anonymous says:

    Tara, to answer the question you pose in the title of your view point "Community Enhancement or Division", I believe the answer is, this tax enhances community division.

  4. Econ O. Mist says:

    Good Viewpoint – thanks for that.  Caymanians (being the people with a say) need to consider the effects of taxing the private sector into contracting (or later extinction) such that the GDP goes down and the overall tax recovery actuallly is reduced by the economy being driven into contraction.  Greece is the perfect example of a massive civil service drowning the ability of the private sector to pay taxes as to afford it (along with corrupt avoidance of taxes by the rich, which sounds familiar no doubt).

    What is needed is a growing private sector and a sustainable level of civil service and welfare costs and payments, set at a level that the revenues from duties and other indirect taxes can sustain without the payor being driven away or out of business.  Every business that closes is another former tax-payer (though its permits and duties) that is gone, which is another group of people needing welfare (the former employees), and an even bigger tax burder on the remaining businesses to carry them on welfare as well as the rest of the load.  This snowballs until you have Greece – no one has jobs, and the govenment collapses financially because there's not enough economic activity to tax to pay for the civil service and welfare that the voters demanded and the short-sighted politicians delivered in exchange for power (how's that for moral corruption?). 

    Ever Caymanian needs to read this:  http://www.forbes.com/sites/danielmitchell/2012/07/31/heres-why-the-cayman-islands-is-considering-fiscal-suicide/

    This economy needs to be freed so that it can grow, and that will bring money back to the Island.  This path of taxation and no financial accountability, responsibility or restraint marks the final end of Cayman's era of prosperity.  It may be too late already, as the world has seen MacKeeva's suicide note (the tax announcement), and no doubt the funds and trusts and depositors are making plans to be somewhere else as this all collapsed.  International money has no loyalty to Cayman, and it will flow out at the speed of wire transfers and calls to lawyers instructing redomiciliation of the funds and trusts.  Just like that.

  5. O'Really says:

    The issue of whether or not the proposed expat tax is in accordance with the Constitution is not quite as clear cut as you make out.

     

    Firstly, it can be argued that the Constitution was drafted to enshrine certain discriminatory practices and this was recognised during the drafting process. The link below to a submission made at the time makes interesting reading, particularly in the paragraph headed " The effect of rights in an employment setting." 

     

    http://www.constitution.gov.ky/pls/portal/docs/PAGE/CMIHOME/GETINVOLVED/LETTERS/ANONYMOUS/18-04-08.PDF

     

    Although clearly discriminatory provisions in the Constitution were acceptable to the drafters and voters at the time, whether they would survive an external challenge in the ECHR for example is by no means certain.

     

    Secondly, although the Constitution's section on non-discrimination states that it " shall not apply to any law so far as that law makes provision—

     

    (a)for the appropriation of revenues or other funds of the Cayman Islands or for the imposition of taxation (including the levying of fees for the grants of licences)

     

    there are acceptable and unacceptable forms of discrimination. ECHR tax decisions make this quite clear.

     

    I would suggest that within the context of this discussion, exempting work permit holders from tax if they earn less than $20000pa, whilst taxing those earning more than $20000pa is an acceptable form of discrimination. It is not unusual for tax systems to have a sliding scale of rates and to be considered non-discriminatory because no-one is exempted from the system overall and the only criteria for moving from one rate to another is income level.

     

    Exempting a whole section of otherwise taxable individuals based on nationality, whilst taxing another section based on absence of a specific nationality is almost certainly unacceptable discrimination and unlikely to survive an external challenge through the ECHR. 

     

    If this tax is imposed in the current form it will have all the characteristics of the illegal moritorium on status grants introduced in the early 1990's. It will last only as long as it takes for an aggrieved party to seriously challenge it in court. 

    • Anonymous says:

      Let me ask you a question: is the work permit fee discrimination on the basis of nationality? Doesn't it make it more expensive for employers to employ expats and therefore (at least theoretically) discriminates against expats in respect of employment? Why hasn't it been challenged as a human rights violation? Isn't that the same rationale for the proposed payroll tax? Isn't increased employment for Caymanians a legitimate aim?

      It could also possibly be justified on the basis of reverse discrimination since on expats are generally paid more (including salary and benefits) than Caymanians for the same job.  That could be established as part of the exercise of obtaining the tax information.  

      • O'Really says:

        The answers to your questions are:

        No

        Yes

        See first answer

        No

        Yes

         

        Hope that helps.

        • Anonymous says:

          It doesn't help your argument. If providing an incentive to employ Caymanians is a legitimate aim (and the measure is proportionate to attaining that aim) then that may be a justification for a discriminatory policy under the ECHR. Perhaps you should have thought more carefully about your answers rather than flippant yes and no's.   

          • O'Really says:

            "… then that may be a justification for a discriminatory policy…." Until a case is brought before the ECHR where the facts are quite as blatantly discriminatory as they are with the proposed expat tax, the legal position will remain undecided and consequently there is room for differing opinions. At least we both agree it is a discriminatory policy so that's a good start. 

            • Anonymous says:

              Obviously it is discriminatory. It is also discriminatory to charge different rates of tax depending on level of income. The only questions are whether it (a) falls into an exempted category of discrimination or, alternatively, (b) is discrimination which may be reasonably and objectively justified. I agree that it is not clear cut.  

              • O'Really says:

                I sincerely hope you are playing devil's advocate here and don't actually buy into the position you are putting forward. Do you believe for one moment that Bush has suggested this tax as a mechanism to provide " … an incentive to employ Caymanians " as you have indicated? I'm not sure I've even seen anyone from ther UDP advance this line of argument and they have tried just about everything. 

                 

                Your reasoning appears to be based on some form of equivalency in discrimination between the work permit system and the proposed tax. There are multiple levels of reasoning against this position and I have some time on my hands this morning, so I will set out the facts supporting my position.

                 

                At what I will call the macro level there are significant differences between the application of human rights laws for very different groups of people, in this case:

                1) Caymanians and work permit applicants who prior to the completion of the work permit process have no legal right to even be in Cayman ( excluding non-employment related visits ) and who therefore broadly have no rights under our Constitution or Bill of Rights ( when implemented ); and

                2) Caymanians, PR holders, government employees and work permit holders, all of whom are legally allowed to reside and work in Cayman and all of whom are covered by the Constitution and Bill of Rights.

                 

                My view is that the ECHR would apply very different HR considerations to the latter group compared to the former when determining broadly what was and wasn't discrimination.

                 

                The second level of reasoning aganst your position is your apparently flawed understanding of how the existing work permit system and proposed tax work in relation to the promotion of Caymanian employment. 

                1) The work permit by law must be paid by the employer. There is a clear financial advantage in this for the creators of jobs to prefer a Caymanian. There is also widespread precedence in immigration systems worldwide for charging a fee for work permits or their equivalent.

                2) The proposed tax has been structured not to penalise the creators of jobs since the burden falls to the WP holder. It therefore lacks the financial advantage inherent in the work permit system detailed above. In fact, under the existing proposal ( which by the time I post this may well have changed, such is the chaos that rules ) the employer will be exempted from the 5% pension contribution currently required by law, so if anything the proposed system provides a financial advantage for not employing Caymanians. I also suspect that you would be hard put to find any precedence in developed countries for tax laws as blatantly discriminatory as those proposed.

                 

                Based on the facts, it is very hard to see how the ECHR could possibly accept the argument that the introduction of this tax was in any way related to promoting Caymanian employment and therefore a reasonable and appropriate form of discrimination comparable to the work permit system.

                 

                The third level of reasoning against your position is based on the specific facts of this issue. To argue that this law is discriminatory, but in an acceptable manner, as your last post outlines, it would be necessary as a minimum to show that it's introduction was reasoned and appropriate after study and consultation.

                 

                It is clear that no studies have been commissioned to review the impact and effect of this law on employment prospects for Caymanians. There has been no consultation with any professional body, who have all come out strongly against it. I don't doubt self interest is a strong motivation for them all, but part of that motivation is based on the very real prospect that a law which will negate Cayman's competitive advantage of being free of direct taxes will lead to the contraction of the economy and a reduction in income levels for those currently employed and future employment opportunities for Caymanians and expats alike. The only statements from anyone representing the UDP that I have read touching on this can be boiled down to " trust me on this" – not exactly hard factual evidence.

                 

                The issues relating to the way this has been handled that would present serious problems in trying to argue that it was for the purpose of creating jobs for Caymanians ( and therefore that it's discriminatory nature was acceptable on this basis )  are too numerous to list, but another obvious one is  exempting specific groups of non-Caymanians, such as government employees ( the largest single group of non-Caymanian employees on the island ) and PR holders.

                 

                 

                The proposal to introduce direct tax for the first time is a fundamental change to the way Cayman presents itself to the world. I doubt the ECHR would accept that such a change was proposed to enhance Caymanian employment opportunities without evidence of serious, thorough review and discussion with all stakeholder groups before such a proposal was even aired publically and we both know this never happened.

                 

                 

                There is always uncertainty in legal matters in the absence of substantive and relevant precedence, but based on the facts and reasonable predictions above, my view is that your opinion is unsupportable. I would be interested to read what facts you can provide to support your position. I am always prepared to learn.

                 

                 

                 

                 

      • Anonymous says:

        I think that you'll find according to the 2010 Census, that generally its actually Caymanians who tend to get paid more (see extract below):

         

        In general, there are more non-Caymanian employees than Caymanians in the lowest income brackets as indicated by the status ratios. There are respectively approximately 246 and 268 non-Caymanians for every 100 Caymanians in the lowest two brackets.

        There are relatively more Caymanians in the higher income brackets, particularly in the $38,400 – $57,599 where there are close to 67 non-Caymanians for every 100 Caymanians. The gap, however, is diminished in the highest earnings bracket.

        • Anonymous says:

          The census figures have nothing to do with the issue. They speak only to the numbers of Caymanians that fall within certain broad, arbitrary income brackets. It obviously does not mean that Caymanians get paid more FOR DOING THE SAME JOB. The issue is whether a Caymanian and an expat DOING THE SAME JOB, say corporate administrator, receive equal pay. A real investigation of this will show that expats generally are paid more in salary and benefits. It is often justified on the basis that expats need special incentives to attract them to come here. In any event, the highest earnings bracket is also artificially low. If this were defined as $150K+ you would find that Caymanians form a small percentage but for political reasons that issue was dodged.   

  6. Anonymous says:

    Police Commisioner Baines – Please arrest this man before he does any further damage to the future of the islands.

  7. Anonymous says:

    The first thing that came to my mind when the premier announced this proposal also was how can this be called "community enhancement"? If it is community emhancecment then the entire community should be included in paying.

    Only a few months ago he was berating the public (directed at caymanians) that us caymanians needed to be more welcoming of foreigners (this was about accepting whatever big investors wanted – in concessions and huge Govt. giveaways) and then he comes out with this most devisive proposal. And inflames the situation again by moving the meeting to west bay….when he finds he is to be met with questions and alternative solutions.

    Like the writer of this viewpoint said; the Govt/Politicians must lead by example….they must first tighten their belts….and cut some of the unneccessary expenditure….waste.

    They must put aside their ego and ask for help…from qualified professionals….and follow some of the many sensible solutions offered. Many are in the Miller/Shaw report…many more have been offered by Mr. Ezzard Miller….and yet more by many of us who make up the Cayman Public.

    Direct Taxation is NOT the way to go.

    And the rest of the Govt. must stand up to the premier.

    Otherwise WE WILL! Caymanians and Expats together!

  8. Anonymous says:

    There have been some extreme comments on both sides of the debate, but if there is anything positive to come out of this fiasco it's seeing all the smart, well spoken Caymanians that have stood up and spoken out in opposition to this tax.  They're the future of this country, not the minority that are xenophobic or the incompetent politicians.

    • Anonymous says:

      Intelligent Caymanians recognize that taxing the expats is only the first step.  Look at what happened in the US – taxation was introduced at 7% in the early 1900s and only affected 1% of the population.  Look at the tax system in the US now.

      Caymanians will be taxed next – and not too far in the future, if government doesn't cut spending (i.e., civil service) soon.

       

  9. Anonymous says:

    "As much as we can all agree that the premier’s proposal is constitutional in that there is a provision to allow discrimination in the matters of immigration and taxation"

    sorry madam, but you are very wrong here: I do not agree this provision does not violate other basic human rights which are coming into force in 6 months or less – this will lead to litigation I guarantee it

    • Anonymous says:

      Perhaps but as you point out they are not yet in force so as it stands it is totally constitutional and doesn't go against anything currently in force with regards human rights or otherwise…..

    • Senior Civil Litigator says:

      I guarantee it too. 

    • Anonymous says:

      I have read most of the Constitution but did'nt come accross "a provision to allow discrimination in the matters of immigration and taxation" may be I missed that point.  However if the poster at 10:55 is referring to the immigration department having the ability to control who can come and work here and implement the fees that might be set from time to time you are off base on that one.  Show me a country that does not do that.  Surely you would not want to live here if every tom dick and harry could strollin and do whatever they wish.  Please do not muddy this issue that is before us. Caymanians and Expats Against Taxation is for the benefit of all and it is brillliant that we can all come together on this, but after the dust settles we still have to abide by the laws of the country.  What the Premier is trying to do is not a law of the country but is just another of his thoughtless hare-brained idea that could destroy this Island.  I am glad that the group has decided to hold the rally/meeting in the town centre and I hope to be there.  To the Group- please set it at a convenient time e.g. during the lunch time (i am sure your offices will give you an extra half hour or so), or barring that then hold it at  4:30/5:00 so that those of us who live out of Town would not have to go home and drive back in.

       

       

       

    • Anonymous says:

      What other basic human rights?

    • NoTax says:

      You may be right, but so is she – she only said it was Constitutionally right.  Human rights be damned in our governments eyes…

      • Anonymous says:

        Actually the Bill of Rights is part of the Constitution. Both the Bill of Rights and the remainder of the Constitution are to be read and interpreted in a manner consistent with the European Convention on Human Rights. Any court in Cayman deciding whether any payroll tax was lawful would be guided by the European Convention and how it is interpreted by the relevant European courts. I am Caymanian and I doubt that discriminatory taxation exemption on the basis of being Caymanian or possessing Caymanian status would be held to lawful , and I am certain if the government extends the exemption further to exclude spouses of Caymanians or others then I think the tax is doomed.

        • Anonymous says:

          There is no difference between being Caymanian and possessing Caymanian status – just to clarify a common misconception.

  10. Peanuts says:

    To puy it simply "Throw the Bums Out" get bush out.

  11. Truth Hurts says:

    Totally agree. The solutions currently proposed still ignore what I feel the majority of the people want to see, which is a considerable trimming down on out-of-control government spending, with the Premier leading by example.

    We are all living on this beautiful island together, and we must stand together to figure out solutions. Solutions that divide the country are neither fair, equitable, or in the spirit of unity. Sadly there have been issues in the past between expats and Caymanians – let this not be another one.

  12. Anonymous says:

    Why do we need a new tax to gain $50m more revenue when the Premier's statement says he is projecting a $83m surplus? Does it mean we will have $33m surplus without it?

  13. Non-partisan says:

    Thank you Tara. There is a divide that is being created over this issue. Some people believe that an expat-tax is the only option on the table, and to avoid mass layoffs and domestic problems, taxing is the best way to avoid this from happening. So they want nothing to do with the expats that are protesting. I can see if this continues and government fails to find good alternatives to our budget problem, tensions could flare and someone may get hurt. We need to deal with the responsibly as quick as possible.