jamesg1979

An interesting (and breaking) piece of legislation is being discussed this very day in regards to expats (or work permit holders) paying around a 10% tax in the Cayman Islands.
Be very interesting to see how this goes, having not been here long enough, my opinion is likely blemished. For what its worth though, I can see a spiralling issue with people leaving the island, Caymanians not interested in certain jobs, and potentially financial services being ultimately affected.

http://www.compasscayman.com/caycomp...ats-discussed/

I'd be interested in hearing from Gordon Barlow - having been here a lot longer, you may paint a different picture.

Thanks

Gordon Barlow

Well, it's a bit of a poser, James! The hysterical reaction here is certainly warranted, in that any sort of income tax would be a radical innovation. It would be very, very harmful to our tax-haven business - in the context of our reckless and incompetent ruling politicians.

However... I've been holding off with any comments of my own, on my blog and in the public forums, because I don't quite believe it will happen. McKeeva (our "Premier") is a devious fellow, and a very clever politician at this level (15,000 voters) - but he is not stupid. And to introduce this proposed wages-tax looks like stupid. Later on, we can speculate on why he has chosen to run with this crazy option, but for the time being the most prudent reaction is to wait and see.

The bureaucracy needed to enforce a tax of this kind would be expensive, and require an even more bloated Civil Service. Hey, even writing the law would be a serious burden. (Yes, London already has a draft law ready to give us, but that would be a bog-standard one compared with an enforceable one for Cayman. After all, this is an Island of professional tax-advisors!)

I was at the heart of the Chamber of Commerce's fight against a similar sort of proposal back in 1987, and well remember the public hostility that killed it off. McKeeva was a junior backbencher then, and he must remember it too. He must have something up his sleeve this time, which will come to light in due course. For the moment, I regard it as a kite-flying exercise.

If you will keep the members informed here, I will try to figure out what's going on behind the scenes!

Cheers.

Gordon Barlow

This posting supersedes all other posts on the topic of Income Tax in Cayman.

We have just been told that an Income Tax is in our future. Like their counterparts in Greece and vicinity, our ruling politicians have borrowed too much money and can’t pay it back. Rather than cut government waste and Civil Service empires, they propose to tax Work Permit expats’ wages and benefits, while leaving Caymanian nationals untaxed.

It is no exaggeration to say that the proposal may destroy our Offshore tax-haven sector, and therefore the prosperity of these Islands. Forty years ago, Bahamian politicians succumbed to the lure of extreme nationalism. Nassau’s tax-haven operations reduced their local presence drastically, and moved much of their business to Cayman. It took those Islands twenty years to recover. What goes around, comes around, it seems.

Even if the proposal is withdrawn – as it may well be, in the face of widespread public outrage – the seal has been broken on Pandora’s Box. Every next time there is a government budget deficit, taxing foreigners will be the first thing done to eliminate it. If not foreign residents, then our Offshore sector’s clients; if not a wages tax, then a tax on local rents, dividends and capital gains.

Doubts have sprung up in our expat communities like spring flowers. Do we have a long-term future here? Should we sell our homes and local investments? Will some of our Offshore businesses pull up sticks and move to other international tax-havens? Can we ever trust our Caymanian politicians again?

The proposal is popular with our Islands’ xenophobes – a minority among native Caymanians, though a vocal and politically powerful one. They are shouting their resentment of foreign residents at every opportunity, now – adding fuel to the always-smouldering fire of our societal divisions. Taxing expats’ incomes is bad enough; for some of us, the jeering will be the last straw.

For further updates and commentaries, check my blog from time to time.

Gordon Barlow

Just a quick update.

Any tax on incomes has been put on indefinite hold. Our government's revenue-shortfall will be met by "nickel & dime" taxes. The 2013 Budget is a monument to the incompetence and wastefulness of our bloated Civil Service and the determination of our politicians not to change it.

Our best hope is for Britain to impose direct rule as it has done in Turks & Caicos, another colony whose politicians failed to control their spendthrift urges. That would fix the fiscal mess, if only for the duration of the direct rule. On the downside, the humiliation might well drive the local politicians and their most xenophobic supporters onto the streets, and that would signal the end of our international finance-centre and tax-haven.

Transient expats here are not affected, and nobody wanting to come should be put off coming. Long-term immigrants, though, have lost much of their confidence in Cayman's long-term future. Many are "looking for boltholes" against the day when our little paradise closes down. I have used that title for two recent posts on my blog; they may be of passing interest to members of this British Expats forum.