The Cayman Islands, a British Overseas Territory in the western Caribbean and a major world offshore financial center, has abandoned its plans to tax expatriate workers a 10% payroll tax on earning over US$36,000.
After almost two weeks of campaigning by islanders, the Cayman Islands’ government, lead by Premier McKeeva Bush, has dropped the proposed “community enhancement fee” (as Bush preferred to call the proposed tax) and issued a statement confirming the “fee” was “off the table and will not be implemented.”
The Cayman Islands Real Estate Brokers Association said in news reports that the proposed 10% tax would have meant giving up “the single-most important value proposition that the Cayman Islands has to offer our investors – no direct taxation” and would see the territory lose out to its competitors.
According to local media, 91,712 companies were registered on the islands as of March 2011. This included 235 banks and 758 insurance companies. Assets for the registered companies totaled US$1.607 trillion last September, down from US$1.725 trillion a year earlier. In the light of the shortfall, the UK government has called on the territory to diversify.
Though Bush may have caved in under the pressure from local groups, he has announced that other sources of revenue will be introduced to replace the “expat tax” including raised work permit fees and property stamp duties.