[Updated with Premier Cox's response] The Cayman Islands will be introducing a 10% tax for foreign workers earning over $20,000 per year, the Cayman media reports.
Although revenue expectations have not yet been confirmed, government hopes to collect around $50 million from the new tax reports said. Cayman Premier McKeeva Bush said he did not want to impose the tax, but he had no choice because the United Kingdom was demanding a sustainable budget.
“The [Foreign and Commonwealth Office] insisted that the Government strengthen its fiscal position by implementing a greater level of expenditure reductions than had hitherto been made by honourable ministers and senior civil servants. The concern is to make expenditures more sustainable going forward into future fiscal years,” Mr Bush said in a statement.
“Government has opted to introduce a Community Enhancement Fee that is linked to the remuneration level received by work-permit holders in the Cayman Islands. The Fee – which is payable to Government – will be charged in respect of remuneration levels that exceed $20,000 per year. The employee on a work-permit will make a contribution to the Fee – which will be calculated at 10% of the employee’s remuneration,” continued Mr Bush.
Earlier this year the Cayman Premier hit out at Bermuda saying said that while Bermuda has been the champion of the insurance and reinsurance industry, the Cayman Islands was now a better choice and could grow “without the malice, without the inhibitions of race, without the inhibitions of transport.”
Mr Bush said Cayman was actually taking action while Bermuda was only still talking about making changes. “In the mid Atlantic they say they ‘may’ reduce some fees; we have reduced fees,” he said.
Update 7.22pm: The Premier and Minister of Finance Paula Cox offered the following response in light of news regarding the Cayman Islands’ levying of a payroll tax on its guest workers.
As it specifically relates to their criticism of other jurisdictions including Bermuda, Premier Cox said, “To be clear, this is not the first time that Cayman has made disparaging remarks about other jurisdictions in order to cover up the problems that he has had to address in his own Country.
“In fact I spoke to his comments as far back as September 2011, and I am of the view that there really isn’t nothing new to add. Back then, I noted that: ‘I was recently at the Overseas Territory Conference in the UK where Cayman signed a Framework for Fiscal Responsibility that was imposed by the UK Government and that was considered to be non-negotiable. Mr. Bush has admitted that as a result of that document, he has had to impose the payroll tax’.”
“It should also be noted that, in addition to the 10% payroll tax, work permit holders in Cayman must pay an annual work permit fee each year that exceeds the highest work permit paid in Bermuda for the total of 10 years.”
Premier Cox continued, “The FCO is also of the firm view that the strengthening and improving of fiscal results for the Government must not occur solely as a result of reductions to expenditure, but revenues of the Government need serious enhancement and expansion.
“Indeed one should note that the new deal that the UK repeatedly promotes is one based on strategic and operational issues and requires that Overseas Territories adhere to standards that Bermuda has already on an independent basis taken.”
Premier Cox added, “I have also stated that: ‘Provided that we remain focused on our strategies of collaboration with our business partners to enhance our enviable reputation by: strengthening our relationships with the European Union, UK and US jurisdictions; strengthening our regulations to satisfy the global regulatory agencies; and enacting business-friendly legislation, then it is unlikely that Mr. Bush’s comments will represent a serious threat to Bermuda’s existing reinsurance market in the short term’.”
As it relates to attracting additional business to our shores, Premier Cox noted, “We don’t necessarily see this latest development with the Cayman Islands alone as an opportunity to attract more business to Bermuda, as we already have our strategy to grow the financial services sector with the establishment of the Ministry of Business Development & Tourism, and the establishment of a section within that Ministry titled the Business Development Unit.
“The Business Development Unit was designed to provide an innovative body within the Government that focuses on stimulating job creation and GDP growth, improving brand equity and furthering diversification of the economy and industry sustainability, within the international business and tourism sectors of Bermuda’s economy.”
“While Cayman has been forced to consolidate their finances, Bermuda has already taken plans to stabilise our fiscal position over the medium term.
“Budget 2012 / 2013 charts a course to bring Bermuda’s finances back to balance over the medium term using its Medium Term Expenditure Framework (MTEF). This MTEF that has been adopted by the Ministry of Finance will provide for surpluses on the primary balance through to 2015 – 2016.
“This will be achieved by restraining primary current account spending to 2012 -2013 levels over the next several years and enhancing revenue through policies that generate income from government fixed assets and other revenue streams.”
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Articles that link to this one:
- Bob Richards: ‘Cayman Situation Is A Warning’ | Bernews.com | July 28, 2012