* British territory is known as a tax haven for the rich
* Critics said payroll tax would send investors elsewhere
By Shurna Robbins
GEORGE TOWN, Cayman Islands, Aug 7 The Cayman
Islands has dropped plans to impose an income tax on foreign
workers nearly two weeks after proposing it in a last-ditch
effort to overcome budget woes.
The Cayman Islands, which has had no income tax, is known as
a tax haven for the mega-rich. The irony of imposing the tax was
not lost on the financial industry workers who came out in
droves to protest a measure that they said could hurt the
industry that has made the beach-lined British territory one of
the richest in the Caribbean.
The unprecedented proposal - called a "community enhancement
fee" - would have imposed a 10 percent tax on foreign workers
earning more than US$43,200, amended from US$24,000 when it was
Critics said the proposal would cost the territory its
primary competitive edge and send international investors to
other jurisdictions with lower business costs.
Following an urgent discussion with several high-profile
business leaders, Cayman Islands Premier McKeeva Bush said on
Monday that alternate revenues had been identified.
"The tax would be taken off the table if robust, credible
and sustainable revenue that did not hurt the poorest members of
our islands was found. We are satisfied that many of the
commitments from the private sector will meet these criteria,"
Neither he nor the business leaders identified those
revenues but they were expected to be revealed at a public
meeting on Wednesday night.
Several industry associations released statements opposing
the tax. The outcry also was reflected in the Facebook page
Caymanians & Expats United Against Taxation, which collected
over 11,000 members in less than a week. The Cayman population
is about 53,000.
While foreign workers make up about 50 percent of the Cayman
labor force, there were plenty of loopholes that would have
excluded the majority of the top earners in the territory as
well as civil servants, leaving the bulk of the payroll tax
burden to middle-income workers in the private sector.
Experts said the amount of extra revenue the new payroll tax
would have brought in would not be enough to overcome the
government's growing deficit problems.
The financial services sector accounts for about 55 percent
of the Cayman Islands economy, according to an Oxford Economics
report. It also brings in 40 percent of government revenue.
Representatives from the Cayman Finance Association said the
government has not done enough to rein in government spending to
justify a measure such as a payroll tax.
(Editing by Jane Sutton and Cynthia Osterman)