(CNS Business): Following concerns raised by Cayman Finance about the premier's plans to implement a tax on the earnings of expatriate workers, representatives from other parts of the private sector have echoed those concerns and noted the government's failure to consult anyone about the plan. The Cayman Islands Tourism Association (CITA) warned government about the long term damage such a tax would have, while the Chamber of Commerce said it had received expressions of concern from various industry sectors that the tax would have serious consequences. The two key industry bodies both said they would be consulting further with their membership regarding the latest government proposals, and while supporting some of the spending cuts, CITA said it would be looking closely at the planned cut in tourism marketing.

The premier's announcement regarding a possible payroll tax was apparently made without any consultation with the country's private sector as the various industry bodies were taken by surprise.

While both the Cayman Islands Chamber of Commerce and CITA said they understood the need for sustainability and fiscal prudence and the necessary mix of expenditure savings and increasing government revenue, the payroll tax clearly made the representatives of the business community nervous.

“CITA is closely watching the details of announcements and developments in regard to the government budget as a whole and in particular the recent announcements of the proposed Community Enhancement Fee as well as the expenditure cutbacks in marketing and public relations,” a spokesperson for the tourism body said.

“In regard to the details of these proposals, the CITA executive office is reaching out to its members to obtain feedback and input, especially relating to the Community Enhancement Fee, and to gauge likely outcomes that would result from implementation of this fee, so as to enable an informed response. CITA remains concerned of potential negative impact to business a new tax may have and urges government to consider the possibility of long term damage to the economy that would be at risk.”

Meanwhile, the Chamber said while it is still reviewing the statement made by the premier on Wednesday evening and intends to provide an analysis after consultation with its membership, it supported the recommended reductions to expenses and a policy shift for the public sector to contribute to pension and health costs.

“This is a positive step forward and an approach that the Chamber has advocated and supported for several years,” a spokesperson stated. However, the body, which has some 700 business members employing thousands of people that would be subject to the new so-called fee, was far more concerned about the payroll tax.

“The introduction of a Community Enhancement Fee requires much more analysis and review. These types of fees, apparently a payroll tax, have long term consequences that must be evaluated carefully. We have already received expressions of concern from various industry sectors and we plan to share our views with government shortly. We are also seeking more information on the introduction of a fee to enhance the regulatory environment for the funds industry,” the Chamber said, adding that it would be making further public comment once its association had evaluated the proposals.

The Chamber also confirmed that as far as it could establish there had been no private sector consultation and the proposals had not been shared with any industry association prior to the premier’s statement.

The Cayman Islands Bankers Association president told CNS that so far the CIBA had not had the “opportunity to fully analyze the impact of the proposed payroll tax in the absence of a detailed proposal” from the government, but it was offering its support to the statement released by Cayman Finance on Thursday. 

Former Cayman Finance president and chair of the Cayman Islands stock Exchange, Anthony Travers, has also issued his concerns. A staunch anti-tax advocate, he said that as far as Cayman is concerned, people will always find direct taxation repugnant. He said the payroll tax was not a solution to Cayman's economic woes, which were down to government spending more than it earned.

"The back of the envelope calculations appear to ignore the costs of collections, which may exceed $20m,” he said. “That fact, together with an exodus of permit holders, coming on the back of the self-induced folly of the rollover, will result, in no time, in the conclusion that the tax must certainly be doubled or extended to Caymanians to meet the ever increasing targeted sum,” Travers warned.