Bait and switch

| 02/08/2012

It is inconceivable that after almost three decades in politics McKeeva Bush would be happy to go down in Cayman Islands political history as the man that introduced direct taxation. It may well be better than the ‘politician who faced the most police investigations’ but really, only marginally. So it seems probable that the latest proposal is a case of bait and switch.

The idea that he is proposing something so terrible that when the real policy (which may well be still pretty bad) emerges it won’t seem so awful certainly seems to be a popular sentiment. Those who are long-time students of Bush's political modus operandi appear to be in no doubt that this is the case, but so far the 'switch' remains a state secret.

Some have suggested it could be legalized gambling or even VAT, but are these really as bad as a disguised income tax (which is what the community enhancement fee is, no matter what euphemism one uses) that would lead Bush to create what is unarguably the greatest backlash against him since he took office as premier?

When the issue of the premier being under three police investigations emerged, with the exception of the opposition benches in the Legislative Assembly and Bush’s long time critics, none of the islands’ associations or organisations made much comment publicly. Of course, the muttering and head shaking has been going on in the boardrooms and swanky restaurants for some time now about the ‘Stan Thomas Affair’ but no one was prepared to stick their head above the parapet and openly criticise him.

But since he uttered the dirty words “enhancement fee”, every association and its dog has criticised the policy and made it plain that if Bush wishes to cling on to any futile hope that he will lead the next administration he needs to shelve this idea pretty sharpish.

When asked about the impact on the financial services sector of the Cayman Islands with the premier being under investigation for three different cases of possible bribery and corruption, the Law Society said it had no comment. Asked about the introduction of the payroll tax and the body launched a full scale attack, not just on the plan but on the government and its understanding of economic policy and foretold the downfall of Cayman for ever and ever.

All of the private sector associations, leading businessmen, work permit holders, young educated Caymanians and many others who in the past, for one reason or another, have remained more or less silent over each alarming policy and as each questionable budget  unfolded under the premier’s leadership, have now found their voices.

It has been apparent since the first spending plans were presented by this administration that the premier has not taken the slightest bit of notice of the UK’s rather large hints that the country’s finances are a shambles. To quote his favourite Biblical reference, even blind Bartimaeus could see that the UK’s insistence that he cut operating expenses and seek new revenue would eventually lead to this financial crisis.

Bush has spent the last year stating over and over again that there would be no more borrowing because the UK would not allow it. But he still presented a budget to the UK with both long and short term borrowing requirements that he knew full well would be denied. The question, therefore, is what really is hidden up the West Bay magician’s sleeve?

Direct taxation is not the worst thing that can happen to a country, unless of course its main revenue source depends on a philosophy and principle that taxation on what you earn and own is wrong and things that help people legally avoid it are not.

It is also a problem introducing it when your small businesses and poorer people, including your immigrants, are already paying a disproportionately high percentage of taxation via indirect fees, such as duties, work permits, licences and other government taxes.

People earning just over $36,000 per year will be expected to give the government another $3,600. When we add up the percentage of earnings they already pay as a proportion of their income in duty alone, their rate of taxation is, ironically, among the highest in the world.

A common argument for direct rather than indirect taxation is that it is more fair to the poorer people. However, in this instance, since it appears that government plans to introduce its form of income tax on foreigners’ salaries only, this particular form of direct taxation will be a long way from fair.

Aside from all the powerful arguments against it — it’s incredibly discriminatory elements, the fact that it will mark a sea change for Cayman, as well as the point that not all of the alternatives have yet been exhausted — the tax seems an insane proposition, not least because of the obvious problems of collection. How government proposes to introduce a new tax authority, collection agency, enforcement arm, the ability to assess of all potential payers and an education campaign for employers in the next four weeks is impossible to imagine.

On top of that, government has a terrible track record of collecting the money it is owed and of enforcing the laws relating to what employers should pay on behalf of their workers.

But above all, this place is wall to wall with tax accountants and lawyers who have already come up with the ‘special purpose vehicles’ that will ensure that no one earning more than $45k a year will pay a penny of this tax.

The UK has spoken of sustainability and for a tax to be sustainable you’ve got to collect it and it is clear that this tax plan is about the most difficult option when it comes to actually bringing in the money. There are many powerful arguments against this tax but the difficulty in collecting it and Bush’s unlikely desire to want to go down in history as Cayman’s first Zacchaeus, to use another Bible reference, means this absolutely has to be bait and switch.

So come on, Mac! Bring on the switch. We can’t wait!  Casinos? Legalized ganja?  Strip bars and massage parlours? Let s face it, given the backlash in the community to the latest plan, any or all of those are likely to be far more welcome than direct taxation.

Category: Viewpoint

Comments (23)

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  1. Anonymous says:

    The Bait ands Switch is on!!!!!!

     

    Income Tax is on hold. The Premier will make a statement on Monday, August 6, 2012, at Mary Miller Hall (or maybe it will be back in West Bay, McKeeva seems to change his mind and shorts at the same time).

     

    Casinos, coming soon to a port near you (together with all of the corruption that is associated with organized crime; lots and lots of kickbacks to go around to everyone with the right connections).

    • Anonymous says:

      Great article Wendy not only will the Premier be remembered for the introduction of direct taxation (which I believe will never happen) to these islands if it is passed.  He will definately be remembered as the man who single handed gave 3,000 citizens to these islands by the stroke of a pen and killed the goose that laid the golden egg and in return these islands were faced with unemployment and the greatest social service crisis since its discovery in 1503.  Caymanians will never recover from taxes and the mass status grants of 2004.

  2. Anonymous says:

    My guess is gambling is the hook in the bait.

    Which is a tax on the mathematically challenged, who aren't smart enough to be tax accountants and avoid paying taxes.

    Which will also, like direct taxation, require a new arm of Government to regulate it and keep it legal. Can't have crooked roulete wheels you know. Though hopefully it will require fewer persons than an IRS.

    Just don't forget to route some of those 'gambling licencing fees' in to Gamblers Anonymous and other such programmes. Because gambling brings poverty for some as well as wealth for others. And Governments and societies don't get any richer than they were in real terms, they just have more 'lotterry money' to give to their prefered social groups. It's like the Nation Building Fund won the lotterry.

  3. Anonymous says:

    Well said Wendy!!

    • Anonymous says:

      The premier knows that he must do what the Chamber says and that is in their own words:

      –     Do not impose direct taxation

      –    Orchestrate substantial privatization and other asset sales

      –   Make significant reductions in operating expenses

      –   Increase the number of permits reduce work permit fees and make the guest worker program more flexible.

      All these suggestions will balance the budget and improve our  cash reserves all our premier have to do is do it, the Chamber got all these good alternatives from its membership that is made up of very professional people.

      I believe that direct taxation of any form will kill Cayman

      Yes the government should privatize or sell of all their assets and reduce the civil service by 50% but then again these moves just might save us from the 10% taxes and the death of Cayman once direct taxation are introduced.

       

       

       

       

  4. Anonymous says:

    Unfortunately I am pretty sure that this is not bait and switch. This is a purely political move.

    I despise the man's politic's but he is a brilliant politician. I think that this move will damage the economy. Unfortunately His Eternal Greatness does not care as he recognises that this move taps into the sentiment of many who are unable to fully participate in the global economy that brings riches to some. The politics of envy has arrived and this move panders to a core constituency that blame other's for everything that they don't have.

    I suspect that the PPM heirarchy thinks the same way which is why they are silent.

    • Anonymous says:

      The PPM is on public record as being opposed to the proposed payroll tax.

      "This adds to the increasing uncertainty and concern that has been part of Cayman for the last three years and is bound to lessen the attractiveness of this place to do business, work or live," Alden McLaughlin said. "We have been treated to all sorts of uncertainty from budget to budget, as well as the constant breaches of procedure and process, along with attacks on officials and allegations of corruption and police investigations. And now in these already difficult times the business community has this to face."

      The PPM leader warned that this form of income tax would make Cayman unattractive, presenting the danger that the ex-pat community would shrink and undermine the revenue government was trying to collect.

      "The Miller-Shaw report had strongly advised against taxation as it will make the Cayman Islands less competitive in what is already a difficult global situation," he said. "This is the thin end of the wedge. Who would want to come and live in Cayman now?" McLaughlin asked, predicting that Caymanians wouldbe the target for the next round of direct taxation if there was a mass exodus of the country's high earning work permit holders".

      http://centos6-httpd22-php56-mysql55.installer.magneticone.com/o_belozerov/31115drupal622/politics/2012/07/25/payroll-tax-expats-only

  5. Anonymous says:

    It sounds plausible, but you might just be attributing to malice that which is adequately explained by stupidity.

    • Anonymous says:

      Do not be fooled.  Bush is a wiley old fox of a politician.  This is all about the 2013 general election, because if he cannot hold on to power the game is up for him.  The queston is:  How does all this help him improve his chance of winning the next election?  Anyone want to proffer an answer?

      • Anonymous says:

        It is obvious, he saw the results of the OMOV and was schocked, so he is now currying favor with locals by trying to pit them against expats.  Divide and Conquer.   He knows fully well the UK will not stand for a group of people being targeted to pay direct income taxes for the whole country.   Bush wants to be able to turn around and say "See, I tried to avoid my locals getting taxed, but the U.K. forced me", that way, he stlll stands a chance of getting elected come May 2013 because he was trying to defend "his people."  But it backfired big time – he underestimated the intelligence of his own people, most of whom saw that this was latest move would ultimately destroy the country and it was only a matter of time before income tax is also levied against them.   As one poster said, Bush's greatest nightmare is the young educated Caymanians who see him for what he is.  A self-serving politician who don't give a r…ts ass about his country or people.   He is only trying to win the next election, or else all those glorious deals he is supposedly making with all those glorious developers that will supposedly "benefit" the country, will come to naught.

      • Voices says:

        It could be that Bush already knows he will not win in this next election. He's has had many people against him for quite a few years. Now there's 10s of thousands of people against his new Tax law' expats and Caymanians alike.

        If this law passes it will bring these islands to it's knees, and he and everyone else knows this. Maybe, just maybe he wants to take the Cayman Islands, and it's people DOWN with him.

  6. Anonymous9 says:

    Felt this from the beginning when I frist heard abotu the tax proposal. An eerily childish game of reverse psychology/bait and switch.

    Awwwkwarrrrddd

     

  7. Anonymous says:

    Excellent points Wendy!

    The Organizations that you mentioned have remained tight lipped for soooo loooong about obvious wrong doings that Mac's ego has grown to the point of where he feels he is all powerful to do and say whatever he wants.

    Glad though to see that these Organizations and so many of us Caymanians and Expats are finally finding our voice….and doing so collectively.

    As Mr. Ezzard Miller said recently; "Politicians don't like People Power, least of all because it works!"

  8. 1234 says:

    It may well be better than the ‘politician who faced the most police investigations’ but really, only marginally. So it seems probable that the latest proposal is a case of bait and switch.

    The idea that he is proposing something so terrible that when the real policy (which may well be still pretty bad) emerges it won’t seem so awful certainly seems to be a popular sentiment. Those who are long-time students of Bush's political modus operandi appear to be in no doubt that this is the case, but so far the 'switch' remains a state secret.

    Some have suggested it could be legalized gambling or even VAT, but are these really as bad as a disguised income tax (which is what the community enhancement fee is, no matter what euphemism one uses) that would lead Bush to create what is unarguably the greatest backlash against him since he took office as premier?

  9. Anonymous says:

    Great analysis Wendy! 

    I think it might be a HUGE distraction from the other issues at hand…now people aren't talking about moving West Bay Rd., aren't talking about the dump, etc….while everyone is distracted there are new conspiriacies and new government documents being signed that will be leaked in the future…similar to the tourist tax. It's just posturing!

    What will the NET gain to the government be on the Income tax vs. the NET loss of the 50% of tourism tax?

    Will it even be enforced?  Employers can state one salary, and then pay another and nobody would know.  Who is going to monitor all of the employee contracts…if the employment contract even exists?

    Yes, cut spending…but also clean up the mess of all the current violations in the concessions, pensions, health care, etc.!!! 

  10. Anonymous says:

    Perhaps Mac should be reading the 2010 census ( http://www.eso.ky/file.php?path=docum436.pdf )  and making proper calculations before spouting her mouth off about taxation and economics (both of which he clearly knows nothing about/does not understand)

    He also should read this article, and I encourage everyone else to as well: http://www.compasscayman.com/journal/2012/08/01/Pandora-s-box-opened/

    A particularly interesting point for me, as I work in the financial sector myself: “The sector’s competitiveness could be negatively impacted by the proposed measure. It may be noted that financial services account for 83 per cent of Cayman’s GDP.” …. well if direct taxation is introduced, be it against ex pats or all, you can expect the country's GDP to spiral downwards.

    My permit was just renewed.  Had I known about this em, "tax" I would not have even contemplated renewing here, and would have gone to another jurisdiction.  I guess I and others like me will have to "suck it and see" for the next year, and then move on, but one thing is for certain, if direct taxation is introduced, most of us will be winging off to other jurisdictions. 

  11. Anonymous says:

    Can someone please answer this questions for me.

     

    Has the idea of allowing cruise ships to open their casinos in Cayman Island waters ever been brought up? This would attract more cruise ships, they would want to stay over night as well. Benifits of this? People staying on the shore longer and not running back to the ship at 2pm. More people would be shopping, eat and spending money.

    Also, why not allow shops in town to open on Sundays? This again would attact more ships… That is an extra 52 days a year that cruise ships could come to port and spend money.

     

    It all seems to simple…

     

     

    • Anonymous says:

      I've contemplated this as well in the past; however, you have to remember that the longer cruise ships stay on shore, the longer their passengers, which are guaranteed customers, are not spending money on their services. The resulting use of cruise ship services by Cayman residents would most likely be insufficient to make up for the difference. Not to mention that cruise ships generally have food included, so the vast majority would not stay on island for dinner.

      There are several other operational risks for cruise lines, including theft, unwanted passengers, staff preparation, etc. relating to letting outsiders on their ships. There are major risks of a public relations disaster if something were to go wrong. They know what to expect based on the passenger demographic, but opening it up to the island would be very difficult to prepare for and I doubt it is something they would be willing to even talk about, as I'm sure it's been suggested in the past.

  12. Anonymous says:

    I agree.  This is either the most poorly thought out idea of his premiership, and he's already set the bar rather high on that front, or there's a twist coming.

     

    Maybe the switch is a crackdown on corruption and waste.  Hahaha just kidding, XXXXX

  13. Anonymous says:

    Mac is not the first to introduce tax, it was indroduced in 1998.  ( 10% pension10% health insurance)

  14. Anonymous says:

    Spot on, Wendy!