Cayman Islands may lose allure with new 'expat tax'
Source: Agencies |
August 6, 2012, Monday
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Print Edition
Print Edition
ONE among thousands of lawyers, accountants and other workers from around the globe, Paul Fordham is escaping cold weather and the taxman by working in a sunny British territory in the Caribbean. He and many others, however, worry they soon may be looking for another haven.
The Cayman Islands have lost some of their allure by proposing what amounts to the territory's first ever income tax. And it would fall only on expatriate workers like Fordham who have helped build the territory into one of the most famous or, for some, notorious offshore banking centers that offer tax advantages for foreign investment operations.
"The discriminatory nature of the tax has stirred up so much uncertainty for people who moved here thinking they knew what they were getting into," said Fordham, an insurance sector specialist from the London area who moved to the main island of Grand Cayman about 6 years ago. His recent attempt to sell his house collapsed because an interested buyer was spooked by the prospect of the islands' first direct tax.
In the seaside capital of George Town, where financial experts unwind over beer or white wine, conversations have been about little else since July 25, when Premier McKeeva Bush declared his intention to levy a 10 percent income tax on expatriate workers as part of an effort to shore up the government's finances.
Bush refuses to call it a tax, preferring instead to dub it a "community enhancement fee." The 10 percent payroll levy, as things stands now, will be imposed starting September 1 on expatriates who earn more than US$36,000 a year.
It's a monumental shift for the territory of 56,000 people where zero direct taxation, friendly regulations and the global money they lured in recent decades helped transform the economy of the island chain, a dependency of Jamaica until 1959, from a reliance on seafaring, fishing and rope-making.
Government data show 91,712 companies were registered as of March 2011. A total of 235 banks, including most of the world's top 50 banks, held licenses at the end of June as did 758 insurance companies. Assets for the registered companies totaled US$1.607 trillion last September, down from US$1.725 trillion a year earlier.
Bush says the tax is necessary to meet British government demands that the territory diversify its sources of revenue beyond the fees and duties it now relies on, which have left his administration with a budget deficit.
The Cayman Islands have lost some of their allure by proposing what amounts to the territory's first ever income tax. And it would fall only on expatriate workers like Fordham who have helped build the territory into one of the most famous or, for some, notorious offshore banking centers that offer tax advantages for foreign investment operations.
"The discriminatory nature of the tax has stirred up so much uncertainty for people who moved here thinking they knew what they were getting into," said Fordham, an insurance sector specialist from the London area who moved to the main island of Grand Cayman about 6 years ago. His recent attempt to sell his house collapsed because an interested buyer was spooked by the prospect of the islands' first direct tax.
In the seaside capital of George Town, where financial experts unwind over beer or white wine, conversations have been about little else since July 25, when Premier McKeeva Bush declared his intention to levy a 10 percent income tax on expatriate workers as part of an effort to shore up the government's finances.
Bush refuses to call it a tax, preferring instead to dub it a "community enhancement fee." The 10 percent payroll levy, as things stands now, will be imposed starting September 1 on expatriates who earn more than US$36,000 a year.
It's a monumental shift for the territory of 56,000 people where zero direct taxation, friendly regulations and the global money they lured in recent decades helped transform the economy of the island chain, a dependency of Jamaica until 1959, from a reliance on seafaring, fishing and rope-making.
Government data show 91,712 companies were registered as of March 2011. A total of 235 banks, including most of the world's top 50 banks, held licenses at the end of June as did 758 insurance companies. Assets for the registered companies totaled US$1.607 trillion last September, down from US$1.725 trillion a year earlier.
Bush says the tax is necessary to meet British government demands that the territory diversify its sources of revenue beyond the fees and duties it now relies on, which have left his administration with a budget deficit.
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