The Cayman Islands is scrapping a plan to impose a direct income taxon thousands of expatriates working in the British Caribbean territory that isfamed as a no-tax financial center.
Premier McKeeva Bush issued a terse statement late Monday saying that hisproposed tax was "off the table and will not be implemented." He didnot say what alternative revenues might replace it.
The islands' leader said only that his administration was "satisfied thatmany of the commitments from the private sector" will meet his demands fora new source of revenue for the government that won't hit the poorest citizens.He has been huddling with business leaders in recent days.
Zero direct taxation, friendly regulations and the global money they lured havetransformed the tiny British territory into the world's sixth largest financialcenter, with $1.6 trillion officially booked international assets.
Bush announced in late July that he planned to impose a direct tax onexpatriate workers' income Sept. 1 to bail the territorial government out of afinancial hole and to meet Britain's demand that Cayman diversify its sourcesof revenue beyond the work permit fees, duties and other fees it now relies on.
He later said the annual income threshold would be $36,000, which would haveaffected about 5,870 expatriates. He described it as a "communityenhancement fee" rather than a tax.
The proposal outraged many people, who said the tax would be discriminatory andcould destroy the islands' main economic anchor.
On Tuesday, many expatriates were still left guessing about what the newrevenue measures would include.
"The only reaction is confusion as the uncertainty continues. At least hehas removed this one tax that would have been our death sentence," saidGrand Cayman real estate broker Kim Lund, who added that several deals fellthrough after Bush announced the tax plan.
Some wealthy expatriates had said they planned to leave Grand Cayman, whereaccountants, lawyers and other skilled professionals work in coastal officeslooking out on clear, blue seas.
Eden Hurlston, a local man who was a vocal member of a roughly 11,000-memberFacebook group called "Caymanians & Expats Against Taxation,"said he believes the controversy over the scrapped tax has helped people on theislands realize they can demand more accountability from their leaders.
"The people spoke and the powers-that-be had to listen," saidHurlston, who works in the islands' entertainment business.