Stamp and customs duty cut to boost economy

(CNS):  Continuing the legislative sprint to the finish, the members of the Legislative Assembly passed another five pieces of legislation on Friday including amendments to the Customs Tariff and the Stamp Duty bills in a bid to boost development and the real estate industry. Duty on construction materials is to be reduced by 5% and stamp duty is being cut across the island by as much as 2.5% for buyers in the Seven Mile Beach area and 1% elsewhere.

The customs duty reduction will stay in place until January 2010 and the stamp duty window will last only until 1 October 2009. The explanation for the short window of opportunity was, government said, to ensure the flurry of activity associated with stamp duty reductions, which is normally concentrated towards the end of the period, would make an impact on Cayman’s economy sooner rather than later.

Described by Financial Secretary Kenneth Jefferson, who laid the two pieces of legislation on the table, as a package to stimulate the economy, the opposition criticised the moves as too little too late insisting that there was no evidence that such moves would do anything at all to help the people in Cayman who are actually suffering more than ever before.

“People can’t eat cement,” Second Elected Member for West Bay Rolstin Anglin noted with irony. “The economy is in really, really bad shape. We have people coming to us for help that we would never have dreamed would find themselves in such a position. These people don’t even know where the social service department is as they have never needed help ever before.” He said a bill to stimulate real estate would not address the problem. “Does the government believe people are just going to suddenly jump up and build, that we have lots of rich people, rich Caymanians, just sitting around waiting for a break in duty to start building?”

Anglin said that if government had come with a more comprehensive list of duty reductions on things the people actually buy it would at least be something people could understand, but reductions in stamp duty and construction materials were too little too late given the fact that duty was the least of the reasons why so many developers had decided not to build or invest in Cayman. He said the bills were a desperate last attempt to address the government’s long term mismanagement of the economy and gain votes.

The government, however, argued that the 5% reductions on most building materials and significant reductions on stamp duty would stimulate some investment, especially as it was combined with a commitment by the real estate sector to cut commissions industry wide by around 20%.

“We are not suggesting it is a magic bullet. We believe this, together with a reduction in real estate commissions, will have the effect of stimulating real estate development and activity,” said Minister Alden McLaughlin, adding that boosting development was important given how many Caymanians were employed in the construction industry. He explained that this at least was a way of creating new jobs to replace many that would likely be lost in the coming months as major projects finish and few new ones were yet on the horizon.

The government also pushed through three other pieces of legislation, two of which were important changes for the offshore industry.  Amendments to the Companies Law to regulate mergers and the Exempted Limited Partnership Law to regulate wind-ups and dissolutions have been long anticipated by the offshore industry as the changes will offer the industry a much needed opportunity to attract more work to the jurisdiction.

The bills received support from both sides of the House but not before they provided the opposition with another opportunity to criticise the government for the delays in bringing such crucial amendments before the Assembly. The government had stated that the delays were due to a shortage of specialist staff in the legal drafting department.

“Given the contribution that financial services makes to the economy and government revenue one would think that whatever resources are necessary would be allocated to ensure that these bills could be completed in order to avoid missing commercial opportunities,” Anglin said, adding that given the impressive amount of legislation that had suddenly come through the House in the last few weeks, the drafting problems must have been resolved. McLaughlin once again responded to the charges on behalf of government and said despite the inference that government was rushing things through only because of the election, the world would not end on 20 May.

During the day’s debate the members engaged in a number of heated exchanges where Madame Speaker was forced to intervene as the insults flew and voices were raised. Referring to the members as “children” on at least one occasion, the pressure of time was apparent as the day wore on. She tried in vain to make members stay within the parameters of the laws for the debates and not wander into unrelated areas, which caused not only further argument and tit-for-tat on both sides of the floor but absorbed precious time, threatening to upset the government’s tight timeline.

The fifth bill passed on Friday before the evening’s Finance Committee sitting was an amendment to the Public Management and Finance Law to protect the privacy of patient medical records held by the HSA from financial audits.

The Legislative Assembly will meet for one more day of business on Monday, 23 March, before parliament is dissolved in an official ceremony on Tuesday, 24 March, in preparation for the 20 May General Elections.