Cayman Islands scrap planned income tax

Tax haven remains tax haven.

The Cayman islands, famed for being a haven for tax exiles and a jurisdiction which imposes minimal transparency requirements on foreign businesses, has scrapped an income tax which it was planning to levy on expatriate workers.

The Associated Press reports:

[Premier McKeeva] Bush announced in late July that he planned to impose a direct tax on expatriate workers' income Sept. 1 to bail the territorial government out of a financial hole and to meet Britain's demand that Cayman diversify its sources of 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 have affected about 5,870 expatriates. He described it as a "community enhancement fee" rather than a tax.

The proposal outraged many people, who said the tax would be discriminatory and could destroy the islands' main economic anchor.

The tax is, of course, problematic; imposing a special fee just on expatriate workers is a prima facie unjust thing to do. But it is somewhat surprising that Cayman residents have been quite so vehemently opposed to what is, after all, a relatively normal thing to experience in other countries.

It's almost as though they moved there for the express purpose of avoiding tax. Almost.

Scrapping the tax now leaves the Islands with a black hole in their finances, which the other ~48,000 residents of Cayman will struggle to pay off. But there could be a silver lining to that, as accountant and tax campaigner Richard Murphy writes:

The idea that local democracy could actually bring tax havens down is, however, one that I do find rather appealing. There would be a sense of justice in it if it were to happen, and the more local people suffer in places like Cayman and Jersey for the abuse being administered from their shores the moper likely that is to happen.

The Cayman Islands. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either

The question of "who knew what, and when?" shouldn't stop with the Conservative peer.

If Grant Shapps’ enforced resignation as a minister was intended to draw a line under the Mark Clarke affair, it has had the reverse effect. Attention is now shifting to Lord Feldman, who was joint chair during Shapps’  tenure at the top of CCHQ.  It is not just the allegations of sexual harrassment, bullying, and extortion against Mark Clarke, but the question of who knew what, and when.

Although Shapps’ resignation letter says that “the buck” stops with him, his allies are privately furious at his de facto sacking, and they are pointing the finger at Feldman. They point out that not only was Feldman the senior partner on paper, but when the rewards for the unexpected election victory were handed out, it was Feldman who was held up as the key man, while Shapps was given what they see as a relatively lowly position in the Department for International Development.  Yet Feldman is still in post while Shapps was effectively forced out by David Cameron. Once again, says one, “the PM’s mates are protected, the rest of us shafted”.

As Simon Walters reports in this morning’s Mail on Sunday, the focus is turning onto Feldman, while Paul Goodman, the editor of the influential grassroots website ConservativeHome has piled further pressure on the peer by calling for him to go.

But even Feldman’s resignation is unlikely to be the end of the matter. Although the scope of the allegations against Clarke were unknown to many, questions about his behaviour were widespread, and fears about the conduct of elections in the party’s youth wing are also longstanding. Shortly after the 2010 election, Conservative student activists told me they’d cheered when Sadiq Khan defeated Clarke in Tooting, while a group of Conservative staffers were said to be part of the “Six per cent club” – they wanted a swing big enough for a Tory majority, but too small for Clarke to win his seat. The viciousness of Conservative Future’s internal elections is sufficiently well-known, meanwhile, to be a repeated refrain among defenders of the notoriously opaque democratic process in Labour Students, with supporters of a one member one vote system asked if they would risk elections as vicious as those in their Tory equivalent.

Just as it seems unlikely that Feldman remained ignorant of allegations against Clarke if Shapps knew, it feels untenable to argue that Clarke’s defeat could be cheered by both student Conservatives and Tory staffers and the unpleasantness of the party’s internal election sufficiently well-known by its opponents, without coming across the desk of Conservative politicians above even the chair of CCHQ’s paygrade.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.