Blame PPM for taxation and austerity, says Bush
With the announcement of a payroll tax on expatriate workers as a means of balancing the budget, Premier McKeeva Bush returned to a familiar theme of laying the blame on pressure from the Foreign and Commonwealth Office (FCO) and a compromised economy left behind by the People’s Progressive Movement (PPM), which demitted office in 2009.
On Wednesday, the Premier Mr Bush announced that expats earning more than $20,000 will pay a mandatory payroll tax.
“Government has opted to introduce a Community Enhancement Fee that is linked to the remuneration level received by work permit holders in the Cayman Islands. The fee, which is payable to government, will be charged in respect of remuneration levels that exceed $20,000 per year. The employee on a work permit will make a contribution to the fee, which will be calculated at 10 per cent of the employee’s remuneration,” he said in a statement released to the media.
The Premier also stated that government will seek to introduce another fee to enhance the regulatory environment in respect of the funds industry in the Cayman Islands.
Mr Bush noted that his government was forced either to drastically cut civil service jobs in the range of 500-700, or introduce a new revenue stream.
Mr Bush said that due to the fact that the PPM Administration caused the country to be non-compliant with the financial ratios in the Public Management and Finance Law (PMFL), which resulted in a more than tripling of the national debt of central government, the FCO insisted his government must establish a clear path to compliance without further borrowings.
“The FCO insisted that the Government strengthen its fiscal position by implementing a greater level of expenditure reductions than had hitherto been made by ministers and civil servants. The concern is to make expenditures more sustainable going forward into future fiscal years. The FCO is also of the firm view that the strengthening and improving of fiscal results for the government must not occur solely as a result of reductions to expenditure, but revenues of the government need serious enhancement and expansion,” he stated.
Mr Bush noted that it will be optional for non-Caymanian employees to contribute to pensions.
At present non-Caymanian employees and their employers each contribute five per cent of the employee’s remuneration to pensions.
As for civil servants, any new recruits will have to contribute to both pension and health care costs.
Existing civil servants will be required to pay their health care costs from their salaries. The dependants of civil servants who enjoy the health care coverage from the Cayman Islands National Insurance Company (CINICO) will now be required to pay for the coverage.
“Government is of the firm view that in order for expenditure reductions to be truly sustainable, such reductions should not be restricted to a particular category of expenses: instead, the reductions should be spread across a broad base.
“Accordingly, in addition to the previously mentioned reductions to government’s expenses that impacted personnel costs, the government has reduced operating expenses further. Among the cuts include $1.5 million from public relations, the police helicopter will be disposed off, thus saving $1.7 million and housing allowances that will save the government $1.5 million,” the statement read.
The Premier noted that the FCO also required further cuts to the budget, to the tune of $20 million. This money represents payments to seamen/veteran benefits, social services benefits, including some to the elderly and handicapped persons, temporary rental assistance, temporary payments to unemployed persons, education council scholarships and grants to community programmes.
He stated that he had refused those cuts, as they would bring greater hardship to the community.
The Premier was, however, confident about his government’s budget.
“The achievement of operating expenditure reductions and record low levels of capital expenditure, all result in the government not intending to incur any new long-term debts or loans in the fiscal year. This is a great result –position which very few governments have achieved in recent years, and yet for the present UDP Government, such a feat will be accomplished two consecutive years in a row. We have also achieved an $83 million surplus. which is most difficult in the prevailing economy,” Mr. Bush said in the statement.