Expat foreign workers in the Cayman Islands can expect the government to siphon off 10% of their wages in tax under a controversial new law.
Cayman political leader William McKeeva Bush wants to charge a “community enhancement fee” on expat workers earning more than £15,300.
Expats claim the proposal is an extra payroll tax in disguise that grabs 10% of their income for the island government.
The Cayman Islands is a British Overseas Territory with a long tradition of offering a low tax environment for expat non-residents.
However, the island has faced severe financial difficulties since the banking downturn resulting in the British government stepping in to balance the budget by imposing new taxes and spending cuts.
Bush claims this pressure is behind imposing the new tax.
“The British would not be satisfied with anything but a broadened revenue base which appears sustainable to them,” he said. “To meet that demand we proposed the community enhancement fee.”
Understandably, expats working on the island, mainly in banking and other financial services, are angry that they may now have to pay income tax.
Locals are also unhappy because they fear the tax may frighten offshore companies away from the island – taking valuable income and investment with them.
The argument is raging online at ‘Caymanians and expats united against taxation’, a Facebook page that already has more than 10,000 subscribers. The islands have a population of just 56,000.
A Foreign Office spokesman said that discussions between the UK and the Cayman Islands government about the economy were ongoing, and that the islands “must continue to give careful consideration to each of their budget measures and ensure that they are credible and fiscally sustainable”.
“The UK has not yet seen full details of the measures being considered by the Cayman Islands’ government and will give them due consideration when they are received,” he said.