Insurance duty change is property tax, says Miller

| 26/10/2012

Allstate-Insurance-300x199.jpg(CNS): The independent member for North Side has accused government of introducing a property tax via the back door with changes to the stamp duty law, which introduces a 2% rate on insurance policies rather than the previous flat rate fee of $12. One of a number of tax increases introduced by government in the 2012/13 budget in order to meet the strict spending parameters set out by the FCO government, the amendment is expected to be brought to the Legislative Assembly at next month’s meeting. As well as increasing stamp duty, the amendment provides for duty on property insurance.

Ezzard Miller said that this equates to an annual property tax as it is based on the value of the insurance policy, which is in turn based on the value of people’s homes. The switch means a massive increase, not just for the wealthy but all homeowners, even those owning modest homes. He said the jump from the annual flat fee of $12 to a 2% rate was not just a massive hike but a tax on property ownership. The independent member said most homeowners will not have a choice in the matter asmost have a mortgage and must have property insurance.

“In the current economic climate this is going to affect many ordinary people,” he said. “This is nothing more than a property tax via the back door.”

Miller said he hoped to see people showing their objection to the tax on insurance policies because the man in the street was being crippled by the fees and taxes imposed by the current government due to its failure to address public spending while giving away duty waivers to businesses.

As result, when the amendment comes before the LA he would not support the bill , he said, but noted that his one vote would do little to alter government’s mind; that would take greater support from the community, he said, and pointed to the success of the Cayman United Group in its opposition to the propose ex-pat tax, which was dropped because of the public outcry. “I would like to see the same kind of opposition to this tax from the local activists,” he said.

The new law will also see stamp duty increased from 4% for Caymanians and 6% for non-Caymanians to 7.5% (the current rate for Seven Mile Beach) regardless of the location. However, the threshold before duty is payable for locals has been increased to properties of $300,000 and over and Caymanians will still only pay 2% on those up to $400,000.

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  1. Anonymous says:

    This is all moot if we dont even know how the current impied taxes are being spent. I say put in place a transparent web driven database that allows all citizens to see how each manager is distributing his funds. Watch how much our deficeits turn into surpluses when ceratin people of power and privledge have to to justify in REAL TIME thier expeditures.

  2. Anonymous says:

    the premium rates are ridiculous anyhow

  3. Anonymous says:

    Maybe you should all stop moaning and start paying income tax.

    • Anonymous says:

      Silly comment 15:43. So if we paid income tax, our insurance premium rates would go down? Yep, right.

      • Silly Billy says:

        You missed the point. If Cayman had an income tax system there would be no need for hidden taxes such as the one under discussion. Nothing to do with the level of insurance premiums.

        • Anonymous says:

          "….there would be no need for hidden taxes such as the one under discussion…" I wish this were true, Silly Billy, but governments always need more money (inheritance tax, VAT, local council taxes etc) and in Cayman it is especially true because of all the entitlement programs and vote buying projects.

  4. anonymous says:

    If this UDP led Government wasn't giving so much concessions to all these rich people/investors, then they won't have to tax us poor Caymanians so much. All I am saying to ALL you West Bay voters, especiall. You better vote the current 4 West Bay candidates out of office, this time around.  I do not think it is right for the West Bay district to hold the other districts hostage, for their bad decisions.  The 2 in George Town, the 2 in Bodden Town and the 1 in Cayman Brac needs to be voted out too, as they have no backbones, they are only followers and mouthpieces for their leader.  All they are taxing us for is to feed their greedy appetites and their rich lifestyles.

  5. anonymous says:

    I for one will only pay insurance on what I owe the bank and not what it is valued at.  Every since I have been paying every year from $10,000 – $7,500 and that is ridiculous. No law will compell me to pay more than the mortgage.  This is pure greed on the Government part and on the Insurance Company's part. Then we are being taxed with our utilities, departure from the Island, License for the cars and more.  This is all price gouging and I think there is a law on the books about that ala Cayman Airways prices before Ivan.  With my decision, I say to the Bank and the Insurance Company, lock me up if its not acceptable.

    • anonanondodoodododo says:

      Be careful. In my experience insurance companies apply proportion to claims in such circumstances. Let's say your property is worth $300,000 but you only insure it for £150,000 (e.g. being the mortgage value). If a storm takes off your roof, and damages are assessed at £100,000, you would only get paid £50,000 or 50% of the damage value, as you were only 50% insured overall. 

    • Lloyd says:

      And you will be wasting money by being woefully underinsured.  This will lead to a discount in the coverage were you to ever make a claim to reflect the proportion by which you were uninsured.  This approach does keep premia down overall by reducing the risk of insured claims to the full value of the policy per claim.

  6. Really?? says:

    This spoken by the same man who believes that Govenments deal with Dartl should be valued based upon increase to darts land by the road closure???? Doesn’t that sound like Ezzard is promoting property tax?? How Hypocritical

    • Anonymous says:

      You must be suffering from dyslexia, as you are confusing "properly" valued with "property" value. OK, it is "property" changing hands, and Ezzard (and many other sensible people) says that it should be "properly" valued, but I don't see how you are managing to bring property tax into this.

  7. Anonymous says:

    Thank God for Ezzard Miller , He must be the only one in the LA paying attention. 

    I can remember the insurance company playing with our insurance claim. Yes playing , I got damage to my house went to 2 contractors got their quotes then went to Ins Co. Then the games began . Yes thats right you need to do the roof and the porch ,insulation ,dry walls, air handlers etc. anyway you get what I mean. They said they could only give me Half of the money I'm claiming beacuse of replacement cost. I said I wouldn't be able to fix everything. Yes yes thats true, can you use your savings? No not enough ,ah thats a shame……. can you get a bank loan? I don't want a bank loan I want to get the money my Ins. co promised me. Well you see , the replacement value is twice the amountthat you are insured .HOW did that happen? Well it cost $50 per sq. ft. when you bought the insurance . But now its cost $100 per sq. ft. WHAT I just had a quantity surveyor last year tell me its worth $50 per sq.ft. Pay me on that amount." Thats the premium on that amount ". No you see thats not how we do it. Well then why did you charge that and why did you not tell me then. Well sir, its in the small print, did you read it? Well the person who sold me was a nice person and goes to my church." INSURANCE an open license to steal". amen


  8. Truth says:

    More proof that what is good for CIG is bad for everyone else.  Why would anyone still belive anything they say is beyond understanding.  They are a bunch of greedy, self important theives and everything they do is accourding to that period.  Plan accourdingly or fail along with them.  Everthing CIG will come to an end one way or another.  Either UK bails them out or they fail for every good reason.

  9. Property Valuer says:

    As an on-island property valuer and property owner I would like to point out the self-defeating nature of this tax.

    1. It alienates everyone – current owners and prospective owners/purchasers. Investors like certainty. They do not like uncertainty. The only certainty in Cayman is that as either a property owner, or expat, you will be abused and targeted to pay discriminartorily higher costs at the same time, in order to pay for Cayman's government and employees.

    2. This tax may raise a few hundred thousand dollars, but it will deter many many investors/purchasers and also affects people's perception of wealth, which stops them spending. In other words, many, many people will re-consider their investment decision to buy a property a Cayman and vastly more in stamp duty will be lost than is raised by increasing stamp duty percentages, or implementing an insurance tax. Put simply, at what cost is this 2% of insurance? At the expense of slashing the number of property transactions and therefore slashing income from stamp duty?

    3. All falls in the value of people's property result in a multiplier effect, in reducing people's expenditure by many times the amount of the reduction in their disposable income. You tax more, people spend less. You tax in a scary way, as this government does and you additionally scare investors away. A tax of $1, may reduce the money in circulation in an economy by $3, $5, or $10, as people stop spending and pull in the reigns? I myself was thinking of buying a second property in Cayman, as an investment, but it simply makes no sense, on practically any level. There may be no "taxes" in Cayman, but comparing the expenses of a UK investment property and a Cayman one makes it a laughably easy decision to make from a strictly financial point of view. Looked at over five years, I expect that net rental returns, rental growth, capital growth and the repayment of mortgage on a Cayman property to return around one third of that which I can expect in the UK. Decision made. Reason for this. Costs are much too high in Cayman and rental demand way too low, making a Cayman investment far riskier for far lower return.

    For all of the above reasons a fifteen year-old could tell you, that this makes Cayman a very bad investment at present. 

    A concerned British property valuer working in Cayman.

  10. Anonymous says:

    Another honour tax. Who will be checking that the insurance company passes this onto the Govt? Will we need another Govt department to monitor this. I'm sure they weren't checking if they got $12 for each policy renewal in the past. Any new tax that costs us via Govt payroll to collect and monitor is a complete waste of time. This also hits the people who do the right thing and insure their properties. 

    • Anonymous says:

      The policy must be deemed unenforeceable unless the tax was paid at the time of purchase.

  11. Anonymous says:

    Please go and seize the fake DVDs on sale at the liquor stores.

  12. Anonymous says:

    vote them out……


    • Anon says:

      Ten thumbs up! This is the fault of the stupidity and greed of a few, voted in by the same. Honest people have no say on this Island as it stands now.

      I for one am sick of being a serf in this dictatorship. VOTE.

  13. Anonymous says:

    i hope if ezzard miller gets a chance to make a difference he does. because he certainly talks like he has the solutions . but like they say talk is cheap unless you are paying a lawer to do the talking .

    • Asbo Zaprudder says:

      I'll tell you the difference he would make – a complete and irreversible melt-down of the Cayman economy, especially if he had any power during a period of economic difficulty.

  14. SKEPTICAL says:

    Why hasn’t this previously occurred to anybody else. Owners of single family homes are looking at crippling increases – BUT, what about insurance for Strata Corporations, especially those for Multi-Million dollar West Bay Beach condominiums owned by foreign investors. This could be the proverbial straw breaking the camel’s back.
    Whilst agreeing in principal with Ezzard’s suggestion that this is effectively a property tax, he is slightly off target on the insurance coverage issue. Insurance cover should NOT be calculated on the “market value” of a property – rather on the “replacement/reconstruction” cost, in the event of catastrophic destruction from some event such as “IVAN”. In today’s market, replacement value COULD be more than market, which makes it a decision to consider carefully because, sure as Hell, your insurance company will not bring to your attention the fact that, based on your assessment, you might end up paying a higher premium than necessary. The old maxim ” uberrimae fidei” (UTMOST GOOD FAITH), on which the insurance industry was originally based, appears to have gone out of the window.

    • NeoSurvivor says:

      You bring up good points.     Replacement value is the measure for insurance.     If your home/condo is damaged and you are underinsured, your payment will be on the value you insured.   If you've overinsured, you've wasted the money for that additional value, as assessed by the insurance adjuster.  

      Also important to note that if your home is completely destroyed, some adjusters will assess and deduct the value of your home's foundation.  

      I hate "betting against myself", but will continue to pay insurance premiums as long as I can afford to.    I know several people who have insured their homes in the past, but did not this year;   in some cases a choice, and in others they simply couldn't afford it.  

  15. Anonymous says:

    If I am correct to say more than half of the home in Cayman do not have insurance.  So how can this be correct.

  16. Anonymous says:

    insurance is an achor around everybody's neck in cayman…it is your #1 expense outside of your mortgage…..also current insurance/ strata fees makes property rental financially unviable……

    so what does our government do….yep it  makes a bad situation worse…..

    cost of living is slowly killing cayman

  17. Anonymous says:

    The problem is no one has seen fit to explain how this works, nor even consulted the insurance industry. We believe the tax will be on the premiums, not on the value of the house.

  18. Anonymous says:

    It wouldn't bother me if it weren't being used to fund the most financially irresponsible, incompetent, freeloading and crooked government in the history of time.

  19. Frank says:

    Ezzard is correct with this. It is a huge increase in insurance costs to the public. Lets take an average household of KYD275K and say that an annual insurance premium is 1.8% of the value (which is basically on par). This gives an insurance premium of KYD4,950. 2% of this will give you KYD99.00 which means on an average property (calling this average) the public will end up paying 87% more for insurance duty. This is an astronomical increase. Lets also not forget once how vastly the figures increase when you get into the million dollar homes. Welcome to the Cayman Islands.

    • Tina says:

      It is still an insignificant amount relative to the value of the property and it is borne by those who can most afford it.

      • Anonymous says:

        What do you mean Tina? Is this an annual tax? If yes, then in 5 years you would have paid an extra $50,000 on a $500,000 insured value even without an increase in your property value. What if the same principle was applied to a modest value of $250,000? Do you still feel the same way?

        • Anonymous says:

          The tax is on the insurance not the insured value.  So your are either stupid or scaremongering.

      • Anonymous says:

        Not sure I agree with you.  For the first time, I am seriously considering not renewing my house insurance.  Yes its stupid and irresponsible but I have not had a raise for 6 years.  All my bills have increased by leaps and bounds for every one of those six years and its coming to a choice of can I afford to feed my family or pay over $5,000 in house insurance?  I can't live off a situation which may never happen.  i have a child to feed, educate, clothe and bills to pay.  The govt. needs to find a way to help small businesses instead of just upping fee after fee so that it is almost impossible to survive.   


  20. Anonymous says:

    Per the Stamp Duty Amendment attached to this article, the new stamp duty will be charged as "2% of the cost of new or renewed property insurance PREMIUMS," not on value of property being insured. This results in a significantly less amount than if the % was applied to actual property value as implied.

    Facts should be checked before articles like this are released as not only do they stir residents into a frenzy, it also negatively affects the way that potential investors view the islands' property investment opportunities…

    – A concerned Caymanian

  21. Anonymous says:

    This "tax" will amount to 8.25% of our joint annual pension and together with our house insurance premium will amount to a total of 15.25% of our joint annual pension. We are in a good position pension wise in that my pension was based on salary and has accumulated over a very long period (over 40 years) but with my wife's accumuling only since the pension law was passed. This new "tax" will seriously affect my lifestyle but I can only imagine how this will affect others who are retired and have a nice home but with their pension only accummulating since the pension law came into effect. I can see a lot of people being obliged to drop their house insurance only to avoid paying this new "tax" which they will not afford to pay. 

    • Tina says:

      If the tax is 2% of insurance premium and the tax represents 8.25% of your pension, your insurance will cost 412.5% of your annual income.  Which means you are in big trouble before this tax came along, or alternatively you are completely full of crap.

      By the way, you don't need to write "tax", the word is tax.  On its own. 

      • wayasay says:

        I did not post the oroginal comment, however, someone should teach you basic maths.

        If 2% of Tax is the same as 8.5% of pension, then the formula is as follows:

        (2%) x Tax = (8.5%) X Pension.

        Therefore, Tax = (8.5%) / (2%) X Pension

        Therefour, Tax = 4.25% of Pension.

        The precentages cancel each other out, they do not continue to add a factor of 100.

        Even so, I still do not know how you cane up with  412.5% as 8.5 devided by 2 is not 4.125.

        Who is full of crap now.

        Ezzard Miller is absolutely right on this on. This new tax is a massive increase to everyone over the flat $12.00 that is being collected now. Never thought I would say this but thank God for Ezzard Miller. We certainle need more polititions like him who are willing to shine the light on what is going on in Government behind closed doors.


        • Asquareequalsbsquarepluscsquare says:

          You are an idiot. 

          1) The original poster indicates that the tax represents 8.5% of their pension.

          2) Now we also know that the tax is 2% of insurance.  So insurance is 50 times the tax.

          3) Therefore the insurance would be 50 times 8.5% or 425%.

          Or to put it another way, with Tax being T, Insurance being I and Pension being P.

          1) We know that T = 0.085 x P (allegedly but this is of course nonsense)

          2) We know that T = 0.02 x I

          3) Therefore we know that 0.02 x I = 0.085P

          4) Mutliply both sides by 50.

          5) This gives you I = 4.25P.

          6) This means that the insurance would be 4.25 times the entire pension.

          7) Put another way the insurance would be 425% of the pension.

          Where you went wrong, is that you failed to appreciate the 2% and 8.5% are percentages. 

          So who is full of crap now?  Are you a civil service accountant?

        • Anonymous says:

          Being stupid is unfortunate but being stupid while thinking you are clever is embarrassing. You really don’t understand how percentages work do you?

        • Anonymous says:

          Unfortunately your comment shows that YOU do not understand basic math.

          The first error is that you state the assertion as 2%x Tax = 8.5% x Pension.  The commenter in fact stated 2.5% x Insurance Premium = Tax = 8.5% x Pension.  There is a BIG difference.  

          The second problem is that you haveforgotten the basics of math.  Even if the formula was 2.5% x Tax = 8.5% x Pension, the next step is NOTtax =8.5%/2.5% x Pension, but rather tax = (8.5% x Pension)/2%.  

          Before you tell people they are full of crap, you should check your maths.  The commenters point is absolutely valid – if a person says that 2% of their insurance premium is 8.5% of their pension income, then their insurance premium before the tax is 412% of their income.


  22. Anonymous says:

    Yup. This "stamp duty" sure looks like a property tax to me. Ezzie is correct.


    I reminds me of a "The Simpsons" episode a few years ago where Lisa Simpson was the President of the United States; she and Milhouse decided to sell a tax increase as a tax rebate adjustment. The same principle applies here.


    Sad, it seems that the Caymans are governed by The Simpsons…..orare they the Beverley Hillbillies? Hmmm, no, there are no hills in Cayman if you don't count Mount Trashmore. They must be the Simpsons. "DOH!"

    • Anonymous says:

      mayor quimby…mckeeva bush….

      except bush makes quimby look like man of integrity…

  23. Anonymous says:

    No way could I afford to pay 2% Stamp Duty in additional to yearly insurance for my home.

    Are we talking 11K on 300K home? We have losted our way!  At that rate we lose real estate as money making sector.


    • Burning Man says:

      Then you cannot afford your home. 

    • Anonymous says:

      The tax would be 2% of your insurance premium, not your insured value. So if your premium is 2% of your insured value (as ours is), the tax would be .04% of your insured value, not 2% of your insured value. Big difference.

    • Anonymous says:

      It is 2% stamp duty on the COST of your insurance, not on the insured value of the house. More like $320 than 11K on a $300K home. Where do you get 11K from anyway? That is 3.6% and if you are paying that in insurance premiums, you are already being ripped off big-time!

  24. Anonymous says:

    Property tax discrimination on the basis of national origin against permanent residents of any nationality is illegal.

  25. Cheese Face says:

    Its a kick in the balls for people who are actually doing the right thing and insuring their properties, as apposed to those who aren't knowing full well the governemnt will repair their homes anyway.

    And again, we all know its just more money for keewa to spend on pies and rum, among other things.