Payroll tax for expats only
(CNS): Full story -- Foreign workers earning over $20,000 per year will be paying 10% tax on their earnings, a government official has confirmed. It is understood that, despite promises not to introduce direct taxation, rather than cutting operating expenses the premier is opting to make expatriate workers pay. Full details about the tax, which is being described as a "community enhancement fee" are expected later today. The premier made the surprise announcement to Cayman 27 on Wednesday morning amidst an island-wide power outage. Officials told CNS that the fee would be applied to the earnings of all private sector work permit holders who earn more than CI$20,000 but not expatriate civil servants.
Although revenue expectations have not yet been confirmed, government hopes to collect around $50 million for the public purse from the new tax, inside sources tell CNS. However, it is not yet clear how government proposes to collect the new revenue or how it will enforce payment.
The premier is expected to make an address to the nation on radio and TV on Wednesday evening to reveal his government's intention to introduce the tax in the forthcoming budget in order to balance the books.
In an early reaction to the announcement the opposition leader said he was not surprised that this had happened. He said that the premier's failure to meet any of the requirements set down by the UK in the three-year plan and, more recently, the fiscal agreement had seen the UK place a gun to the premier's head as they can no longer trust him to cut revenue because he has persistently promised but persistently failed to deliver.
"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 would be the target for the next round of direct taxation if there was a mass exodus of the country's high earning work permit holders.
The independent member for North side, Ezzard Miller, pointed out that the premier had just spent the last three years amending immigration laws to attract this type of person and now, in an ironic twist, he was about to drive them all away .
Miller also questioned government's hope of collecting $50 million and estimated that it would be lucky to collect $10 million. Furthermore, there would need to be a new system put in place in order to collect the money, which would likely cost government more than a $1m as there is no infrastructure to collect from people's earnings at present, he noted.
"This is going to be the nail in coffin of the economy. Many of the people he spent the last three years trying to attract, for whom he amended the immigration law over and over again, will be driven away and, given the existing cost of living in Cayman, it will make us completely uncompetitive," he added.
Suggesting that government would collect far less than it hoped to, he said this revenue would have been found far more easily through cutting expenditure, such as the $10 million Nation Building Fund.
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