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Expats in the Cayman Islands are breathing a sigh of relief after it was announced that a proposed ‘community enhancement fee’ has been scrapped by the government.
Last week, we reported that this fee, which was akin to a 10% income tax was designed for expatriates earning over $36,000 a year.
The islands are renowned for their policies on zero direct taxation and the previous proposals sparked outrage amongst locals and expats alike that saw the tax as unjust and threatening to the allure of the Cayman Islands for foreign investment.
The concept of ‘zero direct taxation’ was described by the Real Estate Brokers Association as the “single most important value proposition that the Cayman Islands has to offer.” The islands are the world’s most prominent hedge fund location and one of the largest banking centres in the world.
After weeks of relentless campaigning by the island’s inhabitants, the plug has been pulled on the proposals with Premier McKeeva Bush stating that the plan was “off the table and will not be implemented.” The U-turn justifies Bush’s response to previous criticism where he stated he was open to alternatives.
However, the cutting of this tax means that alternative revenue will have to be raised elsewhere. The global banking crisis and an apparent amount of overspending by the Cayman government has left the administration with a shortfall in revenue.
In a meeting last Wednesday, Bush identified stamp duty on property and increased fees for work permits as examples of areas where revenues could be raised. This time, the government will surely think twice before drafting policies that undermine the main pillars of the Cayman economy.