Dangerous Tax Virus Poised to hit Cayman

August 1, 2012

There is a deadly virus coming which has infected most of the other countries in the world. It has actually come to Cayman rather late. The earliest version infected totalitarian Russia and finally killed it (as we used to know it). Then a new more virulent strain infected the Democracies of Europe. It has Greece on its deathbed, Spain in critical condition, Italy in ICU and the rest of Europe (including the UK) also under medical care. A similar strain of this virus has also infected the USA and we won’t know if the patient will survive until after their elections in November. You would have thought with all the casualties around us that our successive Governments would have by now put policies in place to protect us from this infection – but no – just the opposite! They insist that we follow the same behavior patterns that have led to the infection of the others.

What is the name of this virus you ask? It is called “The Deficit Spending Virus”. And historically its main causes are excessive doses of big Government and the subsequent onset of re-election fever.

It truly is a shame that it has finally come to direct taxation in Cayman. It is not a shame that we have to tax – after all most other countries do so. The shame is that we are already taxed indirectly on everything we buy, so this is actually double taxation. But the real shame is that it did not – and does not have to come to this.

The typical argument of liberals who want to change things is to say the “old ways don’t work anymore”. They point to the serious problems which exist now as proof of this, but fail to mention the new problems are really the result of creeping new policies not the “old ways”. In the case of Cayman, successive Governments have spent well beyond their means. This is not the way this country was run up until fairly recently. This is new policy which has been refined by the 2 party system, with each party trying to outspend the other.

We are now to the point that our “old way” of raising revenue can’t pay for the new spending policies. So what is the solution? Government says put in a new revenue system to pay for the new spending policies. So what if it cripples the Financial, Real Estate, and the Tourism Industries! So what if it costs more to administrate and collect than it will bring in. They are not worried about that because they know this will not stop at 10% (and it will not stop with foreigners)!

This is no solution. It’s like throwing an anchor to a drowning man! The solution is to cut the new spending policies until we reach a level the “old way” of raising revenue (with a few tweaks) can support.

Yes the current Government has made some cuts which will help some going forward, but protestations of the Premier notwithstanding, the current Government just does not have the political will to make the cuts required to save the patient. If you do not amputate a gangrenous limb the patient will die! And honestly, that gangrenous limb is Government itself. There are all kinds of ways the cost of our Government can be reduced, many without sacrificing one bit of efficiency in the process. There are numerous reports covered with dust in Government offices which detail numerous examples of departmental inefficiencies and include suggestions for improvement. But successive Governments have ignored them and taken the easy road. They have figured it will be difficult to re-elect a party which is responsible for cutting back benefits to Government employees. And so they let this voting block determine their course, and therein lies the problem. There are too many politicians who are more concerned with re-election than they are about fiscal responsibility and accountability; more interested in their own wellbeing than that of the country they were elected to serve. And that goes equally for both parties!

However, this will be the legacy of the UDP which is in power now – they will forever be remembered as the party that opened Pandora’s Box of direct taxation. In all of world history, once direct taxation has been introduced, it has always remained – and it has always increased.

Direct taxation makes it too tempting, too easy for Governments to dip into the pockets of its citizens to perpetuate the bureaucracy which will ensure its re-election. This is undoubtedly good for them, but not for us!

We humbly suggest that the proper way to serve this country is to ensure we have the best possible environment to attract local business, tourism, and inward investment, and that includes privatization wherever possible. In this way Government employees will still have jobs, but jobs which will allow advancement and entrepreneurial opportunities without making the Civil Service a drain on its own country. Government Departments which have been more interested in expanding their reach should be reintroduced to the meanings of both “Service” and “civil” and have their influence and size severely curtailed.

This situation is not the fault of the UK. This is the fault of our own successive Governments, and so our own fault – because we have let them get away with it.

The Private Sector has been asked many times over the past 3 decades to identify “new sources of revenue” and we have always cooperated and done so. And we will do so again. But not until Government gets its own house in order. We must resist this direct tax initiative as we would resist cutting our own throats. In the long run there is little difference.