CIG missing $millions in rental stamp duty

| 20/05/2016 | 72 Comments

Cayman News Service(CNS): A memo that was written more than six years ago about government’s failure to collect stamp duty on residential leases suggests that the public purse is missing out on at least a million dollars every year in revenue that government experts said should not be very expensive to collect. Following a freedom of information request made in March by local attorney Peter Polack, the Lands and Survey Department released the memo from its former director to the financial secretary about the failure to collect on more than 8,000 leases.

The review, written in September 2009, concluded that, at the time, the leases in existence could generate well over a million dollars in revenue but the public purse was missing out due to a failure to collect.

As government plans to deliver its budget in just over a week’s time, there is no indication that the issue of rental lease stamp duty is being addressed in this latest plan, which will cover government revenue and expenditure for 18 months.

The 2009 proposal suggests that by introducing a fixed fee schedule into the existing law, the public purse could boost its coffers with little cost being spent on collection and no need to announce a new fee, as the duty is already a legal requirement.

Government at present collects only a fraction of the tax on residential leases it is owed and they come via lawyers who have a fiduciary duty to declare any fees owed.

With an estimated 8,000 residential rental leases in operation, even if the vast majority were to fall into the lower monthly rental category of $1,200 or below, government could collect more than $1 million. Some 6 and a half years on and with more work permits than ever – indicating more renters – and higher rents, the chances are that government could collect double that if it enforced the law.

Recommending that landlords be responsible for the collection and payment of the duty from tenants, the director at the time said it would create a single point of enforcement, making it easier to enforce existing legislation.

Stamp Duty memo, Lands and Survey Director to Financial Secretary, September 2009

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Category: Government Finance, Politics

Comments (72)

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  1. Annie says:

    I wouldn’t worry too much as a residential landlord. Politicians want to get re-elected, so they almost never do anything that might alienate their constituents. They wouldn’t want to fall off their gravy train. Plus they rarely have any semblance of a gonads when it comes to controversy.

  2. Anonymous says:

    It’s actually working as intended since no Caymanian landlord or tenant was ever going to pay anything and only foreign owned condos ended up being affected since they were the only ones facing any chance of prosecution. Doing it differently would be un-Caymanian.

  3. Anonymous says:

    Govt you are really going to charge me a fee? I have my adult children paying ‘rent’ because their sorry backsides don’t have enough money yet to move out and get a mortgage. So me teaching my children responsibility will force me to pay money to the government? How are you going to enforce that?

    Not only that, I have rental properties where I have rented to family. How do you know any better? Most Caymanians are related anyway.

    • Jotnar says:

      So explain why the fact that you are related to the tenant means you don’t have to comply with the law? Why don’t you just admit like everyone else that you are breaking it because you either don’t know about it, or you don’t wish to comply with it and CIG wont enforce it.

      • Anonymous says:

        Herein comes the difficulty in proving whether there is a contract that the government can enforce to charge the tax. Generally family don’t charge and with that premise, because people are helping their family member during hard times and allowing them to live in their house for free, the government cannot tax someone on something that does not exist.

  4. Joe B says:

    Face the facts people. It would take the current Caymanian leadership at least 2 million to collect the one million and then the one million would disappear long before it got to be used for anything other than government upkeep. Is that about right? So why do it unless your a government sponsored voter. Oh wait. That’s why.

  5. Joe B says:

    If the Government here could just stop wasting tens of millions of dollars on stupid things then this would be a non issue. But they can’t. That’s the real problem here in the Cayman Islands. Not things like these.

  6. Anonymous says:

    Structure it as a licence and there is no stamp duty payable and the tenants can save 5%.

    • Anonymous says:

      So now I need a licence to rent a room in my house? So now in addition to paying duties on all the goods I brought in to build my duplex, I now need to have a licence to rent the other side which is all my hard earned money.

      So now because I planned for my retirement, I am being penalized. However, if I spend every penny and then have no money later on in life and go to social services, then I will be given the money the hard working slaved over. I think not. How about encouraging the economy instead of stifling it? Isn’t this why tax structuring came about in the first instance and why many people and companies put their money in the Cayman Islands? If you truly want to start imposing all these little ‘taxes’ here and there, then the Cayman Islands is no better than a high tax jurisdiction. Oh wait, there is a difference. The difference is that at least if living in the US/UK/Canada, there are benefits in return which are not available here.

      • Anonymous says:

        No, dummy, structure the contract as a licence not a lease and the stamp won’t apply as it is does not cover licences.

        • Anonymous says:

          Do explain how the contract would be a licence and not a lease and how that would be enforceable in court when the tenant does not pay?

          • Anonymous says:

            Get a lawyer or google it for an easy answer. And it is easily enforceable, it is a contract after all. In fact it is easier to kick bad “tenants” out if they only have a licence.

  7. Anonymous says:

    Collect $1M from this source and spend $1.5M on enforcement, collection paperwork and court cases …………. makes perfect sense to me. As a landlord it will not cost me, it will be assessed to my tenants. I will simply leave the rent where it is and do what the insurance companies do with the tax on policies, or CUC does on the Diesel tax, include it as a separate item to be paid at the signing of the lease.

    Here is a better idea to collect $1M for the treasury, simply reduce 10 of the large concessions delivered to large developers by $100,000 each and you will have your $1M without any costs attached.

  8. Anonymous says:

    This is practically income tax. Explain the difference.

    This country is advertised as a no tax jurisdiction. Once this is enforced, there is no incentive to invest in such an expensive jurisdiction. The beaches are lovely, yes. There are many other islands with lovely beaches that are less expensive. Don’t think you are the only pretty girl in the batch. Do not forget Cuba is opening up and when investment is allowed freely there. Who will want to invest in such an expensive place as the Cayman Islands anymore.

  9. Anonymous says:

    If we could lose the stamp duty on buying property then the housing market might just come back to life…

  10. Anonymous says:

    All these fees and regulations are just “make work” tasks for the ever expanding civil service. The civil service generates no money and lives of of the labours of the private sector who they are activily stifling. This will soon come to a crashing halt.

  11. Anonymous says:

    An exception to the law allowed Mary Lawrence rights for health insurance. All the other staff on gardening leave for years. Individuals receiving social services that can work and are probably working under the table. Did anyone think that government officials are trying to find ways to pay for all these exceptions?

  12. Annie says:

    I always pay my rental stamp duty, as I have no choice because I lease from a major property management company. IMO This fee should be rolled into the lease, and payed by the landlord, if not payed then the lease is not valid. To expect a leasee to pay this out of good conscience is unlikely to happen.

    • Anonymous says:

      Hear Hear! Simply go to the management firms, Century 21, BCQS, Charterland, Remax, Williams2, and all the strata Boards to comply and ask for their cheques up front right now! No need to over-complicate this, simply roll it into the same department that collects for tourist rentals and add a “Enforcement Compliance Officer” that is regulated to impose FINES and watch the income fly into the budget.

      The KEY to all our woes in Cayman is quite simple really, “Just enforce what we already have on the books.” This goes for everything from littering to work permits to licensing- ENFORCEMENT will change mindsets, period.

      We need to go back to being the ethical country we once were!!!

      “Integrity is doing the right thing, even when no one is watching.” C.S. Lewis

      • Anonymous says:

        Whatever, there are many more private individuals that rent properties that are not strata nor through a company. That money that these private individuals earn from the rental units is their personal income.

      • Anonymous says:

        And so the strata knows that it is not me as the owner living there versus a tenant? So this is property tax!!!

      • Annie says:

        Not at all what I am saying Mr. or Ms. shouting caps, who clearly works for a realty company. Keep your panties on. What I am saying is that it is foolish to expect a tenant to pay a fee, which if they do not pay, will not cause them any adverse effects, but will only add to their bottom line. My guess is that the majority of private residential, non-commercial renter do not even know that they have some moral ‘integrity, blah blah, blah to pay this fee as it is not commonly enforced. Is it a stupid law? Yes. But, and this is my big but(t), if CIG wants to collect these funds, the only way to do so is to require them at the inception of said lease, and to require them from the deeper pocket. Why do you think the health insurance law forces employers to pay for the dependents of employees, and then allows them to deduct the cost? Because otherwise it would not get paid at all. Duh.

  13. Anonymous says:

    Not mentioned is the cost of collection and enforcement. By the time that is subtracted form the estimate million dollar income it will be greatly reduced to the point of being insignificant.

    Once again we are looking to the average person/ wage-earner to carry the cost of government. The people who are already struggling to get by. All this while the rich developers continue to get multi million dollar duty and other concessions.

    It is as if government is in cahoots to make sure the rich get richer and the poor get poorer. It is time those with money carry their share of the burden.

    The current unenforced law should be taken off the books and CIG should cut down on the concessions if they need the funds so badly.

  14. Anonymous says:

    This is discouraging growth and development. I know many Caymanians who have the foresight to build something for their future. So they can receive a little income once built and following retirement. Many Caymanians do not receive enough money from their pension to survive after retirement. The rental income is intended to supplement.

    The Cayman Islands is extremely expensive to live in, especially once not working. Without the rental income, many could not eat or pay their mortgages, or send their children to university etc.

    I feel this tax is unfair for the Caymanians with foresight to be taxed in order for the government to use the money frivolously. Majority of this money may just go to social services or to the politicians pockets. The enforcement of this tax is no better than property tax. There’s very little difference here. The ones that aren’t renting, pay tax on the mortgages.

    As a Caymanian, daily I am finding little incentive to remain living on this rock. I am personally not seeing the benefit for any of these taxes. At least if I was living in a jurisdiction that was high taxed there would be free health care that’s not viewed as a first aid clinic and free education that’s equivalent to our private schools and not the babysitting service the government offers. There would be a proper public transport system in place, including the SMB strip to prevent drink driving. Dogs would not be a nuisance running around. Child maintenance enforced. A points system for drivers which can be lost or earned through paid driving classes. Mandatory on road driving and in class driving lessons. Duty free solar panels. CCTV cameras that actually work. More reasonably priced organic food.

    If I’m to continue to be nickeled and dimed, then I want value for money.

    • Annie says:

      Okay on everything but the organic food. Just a bit too red for this capitalist. If you want more expensively produced food you need to expect to pay more for it.

  15. Anonymous says:

    Landlords are in breach of payment not tenants. Landlords have baked this into rents and have deliberately skimmed it off for years. It is theft.

    There should be a voluntary disclosure window after which landlords are made to pay retroactively, with interest, and penalties.

    Not surprisingly, this also means there is a comfortable CIG department that hasn’t been doing their job to collect this revenue for years, and that house needs to be cleaned out too.

  16. Narcisso Clarke says:

    Make them pay so the cost can trickle down to the these foreigners who can afford it .They want to live in Paradise let them pay just like the Caymanians have to pay for this high cost of living. What are we waiting on lets get this revenue stream going trust me they ain’t going to leave they have never had it this good and where else would let them overwhelm the local population.

    • Anonymous says:

      What a psycho you are. Wishing high cost on other people? It’s expensive for everyone. Rent frequently more than mortgage payments. Hope your God forgives your hate.

    • Anonymous says:

      Neither have you. Let’s hope that this arrangement doesn’t change suddenly, for your sake.

  17. Eric Mousey B says:

    Make these landlords pay and they will stick it to these foreign tenants dey gots the dosh$$$$$ They want to to live ya you gots to PAY$$$$ to play simple as that or they could always leave???? A win win for Cayman and its economy & environment. An opportunity to wean us off this work permit addiction and stop these financial threats we face continually from tax agencies world wide.

  18. Anonymous says:

    Govt doesn’t even know its role. If its the law the Ministers have to change it not tell the civil servants not to enforce it….ps thank you Peter Polack a real man….trying to keep the government in order

  19. Anonymous says:

    The common thread appears to be (with regard to School Fees, Garbage Fees, Hospital bills, and now Residential Lease Stamp Duty) if it causes a Caymanian to have to pay – then ignore it. If a tax, fee or duty applies only to expats and tourists, then enforce it with gusto. I would not be the least bit surprised to find that the LA will address the matter and amend the law so that only expats and tourists will be forced to pay residential stamp duty.

  20. Anonymous says:

    Yes we need to raise more revenue for the government to waste at the same time creating another financial and regulatory burden for the public. Great article, no bias at all.

    • Anonymous says:

      It’s already the law, and those that haven’t been paying are actively embezzling from the CIG…we locked up the Airbnb customer for far less.

  21. Anonymous says:

    Abolish this law unless for commercial properties. There’s many elderly that built rental properties for their retirement because they knew they would receive is not enough. Would you prefer a whole new set of ppl on social services? That’s not going to help the small revenue that govt will collect.

  22. Anonymous says:

    Cut MLA pensions by a small per cent age each year and the same amount is aced without any effort.
    Make them wait until they are 65 and you will not need to think about any other revenue generator for a long while.

  23. Anonymous says:

    Govt already collect stamp duty on your bank account… Something that was abolished in the UK in the 70s…

  24. Anonymous says:

    I reckon if a law is completely unenforced for more than 5 years is should automatically lapse.

  25. Anonymous says:

    Please make laws that do not hurt already hurting people.

  26. YTB says:

    I agree with “3:15”. I think it is absolutely ridiculous and heartless that government expects to collect stamp duty on all rental properties! Perhaps a better idea is for government to start spending the public’s money more wisely instead of expecting the public to fill in the shortfall caused by reckless spending.

    The way I see it, this government is not trying to help it’s people, they’re trying to make it absolutely impossible for anyone to get ahead. They can’t bear to know anyone has a few extra dollars in their bank account. Their mentality is “let’s see where else we can implement taxes to generate more revenue to make us look good”. I’d like to say to our government; think about the many people struggling to try to make ends meet and stop trying to think of ways to implement taxes, perhaps try (and I emphasize “TRY”) to implement ways to save the people money and we will all come out on top. It doesn’t matter whether these landlords are Caymanians or expats, we are all residing here and everything here is expensive!

    How can we advertise that we are a tax free country? That is nothing short of false advertising and deceptive to say the least!

  27. Anonymous says:

    This law should be changed as it only serves to make it more difficult for the average person signing a lease in Cayman to survive. The stamp duty should only be charged on commercial leases or those over a specified large amount. The average person earning $3500 who rents an apartment should not be forced to pay stamp duty on that rental lease.

  28. Anonymous says:

    Stamp duty on lease agreements.. That shouldn’t make things any less convenient!!

  29. Anonymous says:

    When you have an administrative system that gets most of its recurrent revenue from financial services, work permits, import duties, it’s just too hard to sweat the “small stuff”. Traffic tickets also come to mind in the context of low hanging fruit that is left to rot on the ground.

  30. Anonymous says:

    what’s next what is this country coming to

    • Anonymous says:

      It’s coming to even more expensive rents as landlords will have to cover the cost of stamp duty.

      • Anonymous says:

        and then the landlords will just keep all the money anyway as the government still will not be bothered to collect payment.

  31. Anonymous says:

    Failure to collect, failure to enforce, failure failure failure. Maybe the brotherhood has a lot of Landlords?

  32. Anonymous says:

    Just another fine example of Government slackness. Wonder who it is they don’t wish to upset by collecting these. HMMMMMM?

    Food for thought, more Caymanians need to start stepping up and following Mr.Polacks lead, seems he is always left to stick his neck out for the head in the sand Caymanians, and might I add Mr Polack originates from Jamaica. Its a shame Caymanians don’t do more for the betterment of their own country. Not to fault us but we are bogged down with high cost of living and duties while the government just lets fees and debts go uncollected. The person in charge for collecting such fees should be removed from their position.

    Only in Cayman can someone Owe the Cayman islands Government 6 MILLION DOLLARS and go on developing luxury properties without fear of lawsuit or jail. SMH!

    The Truth

  33. Anon says:

    Sorry, what I meant is tenant has to pay owner the stamp duty – so rents are gonna all go up. Won’t effect landlord but will deter tenants

  34. Anon says:

    So, let me get this right – the tenant has to pay not the owner? Ok, yet another way to piss off expats, the list just keeps stacking up against us hey. So glad I’m leaving.

  35. Not more taxes please says:

    So, is it a good idea to raise the cost of living for many and take money out of the economy to be spent by govt on travel expenses for the ministry of gender affairs or similar twaddle? Cayman has succeeded through less tax not more and govt needs to be brought to heel on expenditure, not encouraged.

  36. Tryso Nabodda says:

    Couldn’t collect School Fees, abolished.
    Couldn’t collect Garbage Fees, abolished.

    Don’t stop the Carnival.

    • Anonymous says:

      To base CIG revenue on Consumption Tax is a legitimate model, if, and only if, you are willing to collect them. Why is their no teeth in enforcement to collect garbage fees, school fees, traffic ticket offences, fees owed to the Health System, and now rental fees?
      How do residents expect (be entitled) to receive any services if they willingly choose not to pay. The system is broken and needs fixing.
      A generation of non-paying residents followed by a generation that were failed in the education system is a recipe for crime and poverty.

      • Anonymous says:

        Hahaha, based on consumption? Are you nuts? CIG gets less of its revenue from consumption taxes than the UK does and no one ever accused the UK of being a consumption based tax system.

        The majority of CIG revenue comes from corporation taxes plain and simple, and the bulk of that from companies whose shareholders live overseas.

        We have a tax system based on the old adage don’t tax me, don’t tax thee, tax the man behind the tree.

        • Anonymous says:

          It s an important distinction you make. With such heavy reliance on one revenue source our government, this becomes a big risk. What if major changes occur overnight and the corporate revenue stream is lost? Similar in our stayover tourism market, which is disproportionately dependent on the US tourists (somewhere in the 85% of all stay over arrivals are American I believe), it is also a red flag. Ask any of the oil producing nations about the impact of being overly dependent on a large portion of revenue from one industry- their budgets are a mess.

          • Jotnar says:

            Yep, then compounded by a) the current public sentiment against offshore incorporation and the stigma of having a Cayman incorporation and b) continually increasing the costs of the financial service industry operating here. Recipe for disaster.

    • Anonymous says:

      Budget ; oh the budget….we can’t do X,Y or Z because we need to balance the budget. It is the most important thing EVER! Because, we need to get in compliance with the FFR so that we don’t need to get approval from the UK for our budget.

      I don’t understand but why is this so important (the most important thing) that the politicians get their fingers down in the money pot. What they should be concentrating on is working with what they have. When I am out of a job it gives me time to fix all the broken things around my house or clean my house and make due with what I have.

      A little common sense here would say that the Government should be trying really hard to fix what is broken about government. I am sure people would be happy to pay a stamp duty if the other services were easier and saved them time.

      The first thing that needs fixing is the current system for police records. It is long time to start an online service where such can be order and delivered by e-mail without going into the office and coming back a few days later. That is nearly a free fix and would cause productivity amongst everyone to increase by a lot…spend 4 years working on that instead of worrying about the budget everyday. Matter fact, give up on the budget because the UK will next say you need to pay off contingent liabilities. start working on the fixing not on acquiring the new an fancy for the photo op -those day are gone

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