Archive for July 24th, 2012
Sales tax is a good alternative for Cayman
Sales Tax is simply a consumption tax paid at the point of sale to the consumer. Import duties, such as we now have, actually work based on the cost of goods imported and is therefore also indirectly a consumption tax, but it is collected by government when the goods arrive and before they are sold to the final consumer.mI believe that all of the parties involved in importing and consuming merchandise in this country would benefit if we replaced our current import duty system with a sales tax.
There are two types of importers addressed here: businesses that import goods for resale and entities that import goods for private or personal use.
In relation to the first type of importer I suggest that all of those who maintain a business establishment, such as retailers and wholesalers, should be issued an importer’s license based on their specific business license.
If the sales tax system is utilized then when merchants import merchandise for re-sale, they would simply have to pay the port charges and file copies of their invoices with the Port Authority, then have the goods scanned for contraband by Port Authority, and receive the merchandise.
Most point of sale software being used by businesses today already has an option for collecting sales tax. These licensed businesses would collect the sales tax on the retail amount of sales and pay it directly to the Treasury on a periodic basis.
The second category of importers would purchase a single-use importer’s license based on 25% of the value of the goods including the invoiced cost, plus the shipping costs.
What are the strengths and what are the weaknesses of this proposal?
Strengths:
A. Government will earn more revenue on the same amount of imports.
B. Retailers will have lower inventory costs – resulting in less capital outlay.
C. Consumers will pay lower overall prices even including the sales tax.
D. Consumers might support the local economy rather than shop overseas.
E. A substantial reduction in employees and operating cost of the Customs Dept.
F. Consumers will not experience much of a change with the new system.
G. Using a sales tax system would simplify the current varied import duty system that we have at present.
Weaknesses:
A. Relying on the integrity of retailers to pay collected taxes might be a weakness.
B. The private importers would pay slightly more for their imported goods.
C. Retailers might be burdened by the responsibility for collecting the sales tax.
D Duty Free Stores would need to be treated differently to maintain their status.
F. Relying on the integrity of merchants to pass savings to consumers is an issue.
The attached comparison reflects the income and savings realized if we discarded our current customs duty system and replaced it with a sales tax system. Please see attachment titled Sales Tax.
This analysis shows that government revenue from imported goods will increase based on the amount of mark-up that merchants charge their customers.
While nobody wants to really address the amount of mark-up that retailers make in Cayman, It is believable that with the cost of operating a business in these islands, a realistic mark-up has to be around 70% of the cost of goods and shipping.
Merchants have to take into account the cost of employees, utilities, government fees and business licenses, health insurance costs, pension costs, the cost of theft, the cost of spoilage, the amount that is invested in inventory, the cost of facilities, the cost of warranties, charity, fuel costs, property, vehicle, and liability insurance, and many other expenses. Additionally they must make a sufficient profit so as to cover rising prices, and the increased cost of restocking their inventory. Finally they must make a return on their total investment.
Market size is also a negative issue for businesses operating here, a country with a relatively small customer base and numerous competitors.
It is therefore safe to assume that operating costs are high, and average profit margins have to be considerably high.
The assumption here is that a 70% mark-up rate is average, and the figures below are based on that rate. However, the attached file, as I indicated above, includes various mark-up rates from 10% to 150%.
The figure used for this analysis is a sales tax rate of 17%.
In summary the attached Excel file titled ‘sales tax’ shows that no matter what mark-up rate the merchants presently use, a sales tax of the suggested rate (17%) would result in consumer savings of 4.10%.
The amount that merchants invest in inventory will decrease by an average of 18%, resulting in savings for the merchants. This figure is arrived at when the 22% import duties are removed from the current total cost price plus import duty.
Government revenue from imported merchandise will increase by 31% on the same amount of goods when the average assumed local mark-up rate is used.
When all of these savings are multiplied by the value of our imports it is easy to realize the significance of replacing our current import duty system, with a sales tax system.
An additional financial benefit is that the cost of operating the customs department will be reduced by having fewer employees, thereby bringing substantial savings to government.
Recent events in the Turks andCaicos Islands (TCI) indicate that a Value Added Tax (VAT) system has recently been introduced to commence next year. A VAT system as used is many countries of the world is similar, but more complicated than a simple sales tax, as I am suggesting.
With our own government facing revenue shortages, it is only a matter of time before we ourselves might be required to institute a VAT and this will create a substantial financial burden on merchants and sellers that are already overwhelmed with financial difficulties.
As the name VAT indicates ‘value added tax’, is similar to a sales tax but from the seller’s point of view is more complicated. The VAT is calculated only on the value added to a product. This will result in an accounting nightmare for local merchants and greatly increase their record keeping expenses, so as to prove the value that has been added. At the same time we would most likely still retain our import duty system, plus the value added tax of whatever percentage.
It therefore might be more beneficial to the local economy if we did away with our current customs import duty system altogether and substituted a more stable and economically beneficial sales tax system as I am suggesting.
In my humble view a VAT system is the first step towards an income tax system, as it requires businesses to provide government essentially with information on their earnings. TCI should not be too surprised that income tax will be their next alternative when the next budget crisis arrives.
We in the Cayman Islands should be more proactive in planning for our future, and my point is that now is the time to look for alternative revenue streams.
A sales tax system is therefore an alternative that we should analyze and take into consideration as to whether we will benefit by adopting this system and discarding our import duty system.
My purpose for writing this and any other article is to stimulate real debate and to encourage this country to move away from where we are, and with the hope that each of us will contribute more to building a better society.
My suggestions are not perfect and I am sure they can be improved. Your critique is welcome!
Byrne baby Byrne rugby inferno
(CRFU): Seconds away! Round 3 of the Cayman Summer Mixed Touch Rugby League finished last week with teams starting to flex their muscles and knuckle down to some tough games of touch rugby. The list of famous “Howards” is not long. Once you get past Stern, Hughes, Jones and “the Duck” there is scant left to celebrate. Until Now. May I introduce one Howard Byrne. Regular enthusiasts of touch rugby will be familiar with the exploits of Mr. Byrne who has for many years helped Genesis Five Nations come close to glory in the summer league.
DIVISION 1
However, against DART the crowd was treated to a virtuoso performance of touch rugby. Byrne simply bamboozled a bemusedDART defence with his moves. Opening his magical box of tricks he pulled out a cornucopia of windmill passes, exaggerated dummies, and exorbitant dives.
When he is in this type of form defenders have little or no clue as to what he will do next. In fairness, I’m not convinced his teammates or even Howard himself know for sure what’s coming up but when it works it is sublime. He racked up five tries and the Most Valuable Player award in an 8-0 drubbing of DART who will be heartened by the knowledge that they are unlikely to come up against another player of this type until… well until they meet Genesis Five Nations again.
In an exciting game between Stepping Stones and an under strength Maples2, it was the underdogs who took an early lead through an excellent line break from Justin Colgan. Stepping Stones looked out of sorts for much of the game as their passing faltered under pressure from a resolute Maples2 defence. Ray Galletly finally broke their duck in a nice overlap but was injured in the act of scoring hampering him for the rest of the game. Their greater experience at this level began to tell and Stepping Stones had the majority of possession and carried the greater try threat. Tries from Stuart Geddes (2) and Lisa Bird were answered by excellent scores from Alasdair Robertson and Sandra Patron for Maples2. The score was always close but the result was put beyond doubt when Vikki Piaso and Riley Mullen finished the job to make the 6-3 score to Stepping Stones a little flattering to the potential league leaders.
Maples1 cruised to a 6-1 win over Ogier. One of the aspects of the match that captain Marty Livingston will be proud of is the egalitarian way his team has of scoring points – six tries, six different scorers. Marx, Karl rather than Groucho, would have been proud of their utopian co-operative spirit of comradeship – all working together for the common good. Comrades Scott MacDonald, Ed Hayward, Jyoti Choi, Mark Fagan, Carmel Harms and Chandra Friesen shared the spoils. I can’t be sure but I swear I heard the quiet strains of The Internationale being hummed as they left the pitch!
Trident Titans showed that they belong in the top flight with a convincing 8-2 win over KPMG1 to move into third in the league table. Three tries from James Waters and two from Nic Swartz were decisive with David Laau, Jacqui Davis and Yi-Jing Chen adding the extras. Niall O’Sullivan and Ryan Eisenhammer put KPMG1 on the scoresheet.
DIVISION 3
Zolfo Cooper, sounding like the lovechild of a one night tryst between Frank Zappa and Alice Cooper but in actual fact a world leader in corporate recovery, restructuring, and financial advisory services, took on the communications giant LIME. This match had more ding dong than the Bells of Notre Dame after the Hunchback had been on a 24-hour cocktail bender of Red Bull, espresso and nicotine. DING! It started reasonably enough with early tries from Neil Coley and Tom Eliot. DONG! LIME answered with a neat score from Jonny Hillyard. BONG! A lively first half descended into a fractious second period as both teams were hell-bent on the win. CLANG! The to-and-fro of a pulsating game turned to push-and-shove as an extended period of impolite posturing finally ended with chill pills being dispensed all round. Zolfo Cooper finally ran out deserved 5-3 winners. In this type of form the bells will be ringing across the land for Zolfo Cooper as potential Division Champions.
Delta Force and GCM battled to a 5-5 draw with both teams extremely committed to their cause. Becky Dinwoodie turned in a star performance showing great enthusiasm, good ball handling and superb defence.
KPMG2 racked up their second win of the season with a 5-2 win over Credit Suisse. Two tries for Ian Roberton and one a-piece for Miguel Lopez, Greg Meaker and Kassi Desrochers sealed the deal with Ben MacDonald and Johann Prinsloo scoring for Credit Suisse.
Queensgate Grizz’s Old Fellas maintain their position in the foothills of Division 3 losing to Ernst & Young 3-7. Ronan McCarthy (3), Jonny Lewis (2), Curtis Wilson and Bronwen Gangler scored for Ernst & Young but it was their all round team performance that stood out. If they keep to that team ethic they should ascend the ranks pretty soon.
DIVISION 2
The Heineken Light Maidens continue to assert their own brand of Girl Power with an impressive 3-2 victory over Campbells. Tries from Sharlee Henshaw, Lisa Kehoe and Ashley Puschman sealed the win but it was the energetic performance of the diminutive Sinead Wagner who won the MVP award. Often acting as the conduit in all their best moves the pint-sized dynamo kept the Maidens going forward. The Two Jonnies (Doak and Lewis) kept the match tight but at the final whistle for Campbells it was a case of “Goodnight from me, and Goodnight from him!”
Harmonic continued on the winning trail with a four try haul from Kieron Lyons. He roared through the Walkers defence with ferocious speed and guile. Tim Rossiter weighed in with two tries of his own as Walkers failed to get to grips with Harmonic. James Melen, Martin Davies, David Byrne and Vikki Piaso scored for Walkers but the 6-4 score line secured Harmonics place at the top of the table.
Dark horses Island Heritage continue to move up the table into third with a worthy 3-1 win over lowly DMS. Helen Ennis played extremely well topping off her performance with a wonderful try. Brandon Smith and Marvin Gordon also scored for Island Heritage, with David Bakker answering for DMS.
Alastair Lum scored a fine hat-trick for Deloitte in a decent 6-2 win over Broadhurst. New arrival Yi-Jing Chen scored twice and Dave Acutt added the extras for Deloitte with Matt Keenan and Liz Austin crossing the whitewash for Broadhurst. The result leaves Broadhurst pinned to the bottom of the table but I’m guessing the après-rugby festivities are just as lively no matter what the result.
UBS earned their second draw in three games with a 3-3 result against Rawlinson & Hunter. Missing some scoring opportunities UBS will need to be more clinical as will Rawlinson & Hunter if they are to progress up the table.
Rogue employers exploiting construction workers
(CNS): Complaints from workers that contractors are insisting that they take out their own health insurance, workplace cover and pensions are justified the new labour department has confirmed. Caymanians and permit holders who are seeking work in the building industry do not have to be self-employed agents to work on sites and employers who hire workers, other than a properly licensed sub-contractor or consultant, should take on the liabilities for all employees. The director of the department has said that it takes a “dim view” of any employers who are attempting to exploit workers.He urged anyone who has been told to get their own insurance, health cover, pensions or pay for their permit to lodge a complaint with the department so it can follow up on the accusations.
Mario Ebanks told employers to consult the Labour Law or seek proper legal advice to develop lawful employment contracts. Meanwhile, he said Caymanian or non-Caymanian job seekers who have faced such demands from potential or current employers should report it to the Labour and pensions office, Immigration Enforcement, the Department of Commerce, the Health Insurance Commission, or the National Pensions Office
“During these tough economic times the Department takes a dim view of employers who exploit workers, of any nationality, who are trying to make a decent living and to support their families,” Ebanks said adding that officials will pursue complaints against rogue employers.
He acknowledged that there were contractors attempting to exploit workers and he said that although Caymanian workers could in some circumstances be employed as sub-contractors by general contractors this is extremely costly and would require the construction workers to also have trade & business licenses and be registered as self-employed. Ebanks explained that regular workers must be employed under lawful contracts.
“Employers must be careful to follow the definitions of: "employee", "employer", "conditions of service", and "contract of employment" as outlined in Section 2 of the Labour Law,” Ebanks told CNS. “An employer who hires or engages a worker, other than a properly licensed and documented sub-contractor, contractor, or consultant, will otherwise assume the responsibilities and liabilities of that person as an employee.”
He said the department has received complaints and confidential information where some employees are hiring employees, but are requiring those employees to cover their own Work Permits, Health Insurance, Pension, and also be deprived of overtime payments, public holiday pay, vacation entitlement and workplace injuries compensation.
“This is illegal, and will attract significant penalties with a successful prosecution,” Ebanks said adding that the most recent complaint was received by the department only on Monday.
Independent MLA Ezzard Miller said he too had received a number of complaints from his constituents who were struggling to find employment. He said Caymanians are being forced to act as sub-contractors and being told they must pay their own workplace insurance, health cover and pensions.
“This is exploitation pure and simple and the country’s contractors must start employing Caymanians directly as employees under lawful contracts in order to address the growing unemployment problem in particular among local young men,” Miller told CNS.
With a significant number of Caymanians employed in the construction industry, Miller said he was concerned that local workers were being pushed out of the sector in which they have traditionally worked so that major contractors can employ and exploit cheap labour via work-permits as overseas workers are far less likely to complain.
Gun suspect sent to jail after judge revokes bail
(CNS): A suspect charged with possession of an unlicensed firearm who was then arrested and charged with a burglary while on bail was sent back to jail on Friday by a Grand Court judge. Marcus Manderson, is already facing a long jail sentence if found guilty of possessing the weapon but while bailed for that offence he is alleged to have broken into a George Town grocery store and stolen cash and goods worth around $700. Manderson appeared in court on Friday in connection with his firearm charges, still on bail as he had been released by the summary court following the burglary charge but the crown applied for that bail to be revoked.
Objecting to the crown’s failure to inform her and her client of its intention to ask for bail to be revoked, Anderson’s attorney asked for an adjournment to argue for her client to remain on bail. Lucy Organ of Samson McGrath said her client complied with all the conditions of his bail including a curfew, that he had been released by the summary court and most importantly he had not yet been found guilty of anything.
The crown stated however, that he had been charged with burglary which occurred at McArthur’s Grocery store on North Church Street in May; an offence which was sufficient grounds for his bail to be revoked. Kenneth Fergusson the prosecuting counsel said the crown had significant evidence against the defendant including his finger prints on the shop’s cash register.
Despite the defence attorney’s argument justice Paulette Williams agreed that on the face of it the burglary charges constituted a breach of his bail conditions according to the law and remanded Manderson in custody. She ordered a bail hearing on Wednesday morning to give his lawyer an opportunity to make a case for her client to return to the community until his cases are tried.
Employers warned to give tips to hospitality staff
(CNS): Following a number of complaints filed with the Department of Labour and Pensions government officials are reminding employers to follow the law and ensure that service staff are being given their gratuities. An important part of many workers’ earnings, the government department said hospitality employers should be submitting their systems and plans for distributing tips to employees to the department to ensure they are compliant. Those employers who are not following the law can expect to face heavy fines, it warned, if they are convicted of any labour law offence. The director of the department said his office hopes to ensure that everyone is aware of the law so there are no excuses for rogue employers.
“The Department realizes that some businesses may be new, or have new managers or employees who have not been given proper training or awareness on the Labour Law, or due to business pressure may tend to overlook some legal obligations,” Mario Ebanks said.
Having received a number of confidential complaints he said they were being investigated but the goal was to ensure full compliance with all employers and ensure employees also know their rights.
“At times these infractions are only uncovered when and employee is terminated or resigns, and then they make a complaint with the Department, including details of a host of infractions, including improper recording and distribution of gratuities,’ Ebanks revealed. “The Department is ensuring that businesses are fully aware of the Labour Law, so that as enforcement of the Law becomes more robust it will not be possible for anyone to claim ignorance. The proper recording and distribution is important, since gratuities often form a significant portion of a service-workers income.”
According to the law any wages or gratuity payments earned by an employee must be given to the employee within one week of the making of payment. The employer also has an obligation to give employees precise statements in writing showing how payments were made. Employers who collect gratuities must also display a notice for customers stating the rate of gratuity.
Any service employer who fails to display a notice in a place where it may be easily seen by a customer is guilty of an offence and liable on conviction to a fine of $10,000.
Employers who have discontinued their gratuity service, or If they have switched from one distribution plan to another, the modifications must be approved by the Director of Labour of the impending changes.
Penalties also apply to the other sections presented here. Employers who require assistance or guidance in these matters should contact the Department of Labour and Pensions which is now located on the 2nd floor of Mid Town Plaza on Elgin Avenue and is open to the public from 9:00 a.m. to 4:00 p.m. Monday-Friday; telephone: 945-8960, fax: 945-8961, confidential hotline for labour and pensions complaints: 945-3073.
CS still crunching new budget
(CNS): The UK economist visiting Cayman for the last three weeks to assist in the preparation of a budget left on Saturday, but the budget is still not complete. A spokesperson for the governor’s office confirmed Monday that a revised budget has not been submitted to the UK for approval. He stated that meetings are taking place with civil servants and ministers this week and the conversation is also continuing with the UK about the Cayman Islands government’s spending plans for the next fiscal year. The premier, who is also minister of finance, was responsible for submitting a budget that had UK approval to the Legislative Assembly before the fiscal year end but, since the UK rejected his last minute spending plans, he failed to do so.
Premier McKeeva Bush was then forced to bring an emergency government motion for a stop-gap budget, which ends on 31 August.
The governor’s office said it hopes the revised budget will be with the FCO sometime next week in order to give officials there time to review and approve the proposal before it comes back to the Cayman Islands to be presented at the Legislative Assembly and scrutinized in Finance Committee.
The governor has not yet delivered his traditional Throne Speech, and although the LA session for this parliamentary year opened in June, it did so without the usual pomp and circumstance as government had no budget to present.
Although the government has not revealed how it intends to balance the budget and submit a spending plan with no borrowing which also produces a surplus, Bush has toyed with the idea of raising liquor licenses and cutting some public services but he has stated that no public sector jobs will be lost. The recruitment freeze, however, is still in place.
The most recent minutes from the deputy governor’s office indicated that all senior civil servants were being asked to consider any possible cost saving measures to help balance the public books.
Bush had attempted to submit a budget to the UK which, although had a small operating surplus, contained both a short term loan, namely an overdraft facility of up to $28 million, and a long term borrowing requirement of a further $59 million. As minister of finance, the premier was well aware that the UK was expecting a surplus budget this year with no borrowing as he had said on numerous occasions that his government was not going to increase the country’s debt burden.
As a result, Bush was forced to bring in an interim spending plan of $127 million of appropriations for July and August to give him and his government time to come up with a new budget in which operating expenses have been reduced.
Track stars fine tune ahead of London games
(CIOC): The London Olympics start this weekend and the five Cayman Islands athletes are fine tuning for the biggest challenge of their careers. Track queen Cydonie Mothersill runs in the 200 metres from 6 August, Ronald Forbes is in the 110m hurdles from 7 August and Kemar Hyman is in the 100m from 4 August. Swimming brothers Shaune and Brett Fraser are the first Caymanians in action, in the 200m freestyle on Sunday. At the Spectrum Sports track in Guildford, 30 miles south of London, on Monday, Forbes and Hyman were working hard with last minute adjustments under the watchful eye of track technical director Kenrick Williams and Joey Scott, Forbes’s specialist coach.
“I’ve sent a link on Facebook for all the fans watching,” Forbes said. “When me, Kemar and Cydonie go at it, we’re on track.“Our training sessions have been going good. The weather, believe it or not, has more or less been on our side. I’m finally glad to see that I’m back in full training. The injury I had earlier this year has gone and I’m just going to go out there and give it my 100 per cent as usual.
“Hopefully, I’ll pull off a personal best performance which I think I’m capable of achieving and I really think my team-mates can do the same, especially Kemar who has been having a great year.
“I think we should all be very proud of him and also the whole of Cayman Islands contingent in London. These Games are certainly going to be very exciting. I’m not an amateur anymore. I went to the last Olympics in Beijing and kind of know what to expect with the opening ceremony on Friday. I do hope that London can top what Beijing did.
“The opening ceremony is fit to be a blast and I’m really looking forward to it and the Games really kicking off. “
Hyman said: “I’m the Cayman Islands 100m record holder with 9.95 seconds. Training has been great for me and Ronald. We’ve put in a lot of hard work throughout the year.
“I’ve had a really successful year so far and for him I want to see himdo his best and hopefully get to the final. For me, I’ll just try to get through the rounds.
“My first major meet was in 2009 and hopefully, I can bounce back and in these Olympics make it through the rounds and maybe surprise some people who doubted me and make it to the latter rounds and surprise myself.”
Hyman’s improvement this year has been phenomenal. He has shattered the Cayman Islands 100m record and gone from a fringe competitor to genuine world class performer.
“My progression throughout this year has been immense. My coach always said that the times I do in training if I could produce that in races then I could be a champ. I really doubted him without worrying about my times and it produced my personal best in Madrid three weeks ago with the sub-10 run.
“I really don’t know what to expect but hope to go faster than 9.95 seconds and give the Cayman Islands another record. I just want to keep shocking myself and stay injury free.
“Even after the Olympics, I’m definitely sure Ronald and I can get in meets in Europe. I’m looking forward to that and in the years to come. I just came out of school in June. This is fresh and new to me and Ronald is like a mentor right now. He can teach ne and hopefully he will be good for me in the upcoming years.”
Coach Williams said: “I’ve noticed that Ronald and his coach Joey are getting on well and look ahead of what he was at Beijing when he made it to the second round. Hopefully, this time he can go straight through to the finals – and this time we can get a least a third of the pie.
“Kemar was working with his personal coach in Birmingham and I’m just supervising him until he links up with him again in the Olympic village. The only drawback for us was that in the first week it was very cold and coming from a hot and humid climate.
“Two days ago the weather improved and I hope it transpires for the Olympics.
“On Thursday we have a flag-raising ceremony, the day before the opening ceremony. We know the athletes have been training really hard. Cydonie is not here with us at the moment, however, she will join us in the near future and we hope that the track and field team will do great things for the Cayman Islands. “
Coach Joey Scott said: “This is my first season with Ronald. I got him just before the Commonwealth Games and he has actually improved a lot and is more mentally mature.
“Ron has overcome a lot of injuries this year and setbacks and now our training is going 100 per cent. When we go into the village on Wednesday we will still have plenty of time to get ready for competition.
“Ron has not had as much competition as we would have liked, but we’re going into the mindset that he is going to represent the Cayman Islands in the best way possible. Ronald doesn’t have any aches and pains – apart from when I kill him on the track. We set out a schedule and hopefully he will be able to go through the rounds and end up on that podium.”
Ron Shillingford is the Cayman isalnds Olympic Committee pool journalist who will be covering the London games for all local media.