Gov’t to look at booze and fuel duty rating

| 04/08/2020 | 62 Comments

(CNS): The government has said it will take a look at the current situation where the duty on liquor and fuel is rated by volume and not cost, as is the case with all other goods. In response to a private member’s motion passed in the Legislative Assembly Friday, Finance Minister Roy McTaggart said the Customs Tarrifs Law was under review and this would now be part of that process. Ezzard Miller, who filed the motion, said the duty situation discriminated against people who “drink cheaper liquor”, as he asked government to address it.

The North Side representative explained that there are only two items brought into Cayman where importers are not charged duty on how much they pay for the goods plus insurance and freight costs but on volume instead: one is booze and the second is fuel.

Using rum as an example, he said it has a flat duty rate, which he rounded down to $11 per litre bottle. Therefore, if he purchased rum abroad and brought it into Cayman, he would pay $11 for each bottle other than the first, which is duty free. For a cheap $4 bottle this represents a 275% duty and the cost of the bottle of rum is now $15. But if he paid the standard 22%, the duty is only 88 cents and the the total cost of the bottle is $4.88.

Going up the scale, for a $20 bottle $11 represents a 55% duty and for a $50 bottle this is 22%. If he bought a $100 bottle the duty is still $11, which is 11%, but if the duty was 22% he would be paying $22 to government. The current duty on a $500 bottle of rum is still $11, which is 2%, whereas with a 22% duty it would be $110. But if he bought a $1,000 bottle, “which is not outlandish in today’s rum costs”, $11 is around 1%, whereas 22% would be $220.

So, he explained, for those 6 litres of rum, government is currently getting $66 at the flat rate of duty. But if it was 22%, it would be getting $368.28. Therefore, while it could be argued that more people are buying cheap rum, under the current flat rate system, aside from it being unfair, he believes government is missing out on potential revenue.

Miller said government had been telling people for years that they are heavily taxing liquor but the only alcohol being heavily taxed is that being consumed by Caymanians.

This is not the way that a consumption tax system is meant to work, he said, which is that the more expensive an item is the more duty you pay. So, if government charged 22% duty, which is the average rating for most goods, it would collect much more revenue under a more equitable system.

Miller also urged government to do the same thing with fuel. He said he didn’t know the figures regarding fuel or how much government might be able to collect, because although the rate is 75 cents per gallon for all fuel except for that imported by CUC, which is 25 cents, how much it costs and how much is imported remains shrouded in mystery.

Miller said that the price the fuel companies pay for the fuel itself as well as the insurance and freight “is a military secret”, but it was very likely that government was losing out.

Making the fuel companies pay per cost rather than volume would also help lift the lid on the secrecy surrounding exactly how much the bulk suppliers are paying for the fuels they import and where the markup is, the MLA argued.

McTaggart accepted the motion, as he said the Customs Tariff Law was under review. He said he had learned something from Miller with the motion and confirmed the issue needed to be considered, given the valid points raised in his debate.

See the presentation of the motion on CIGTV below:

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Category: Government Finance, Politics

Comments (62)

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  1. Anonymous says:

    The Cayman Islands have an incredible selection of wine, champagne, liquor and beer for the Islands population. This is due in a large part to the fairness of the duty structure. If you greatly increase the duty on the wines that are more expensive people will simply stop purchasing them and purveyors will not import them limiting the selection on the Island and everyone is a looser.

  2. Anonymous says:

    He’s trying to make your booze cheaper you idiots. What do you care if he knows about a $1,000 rum? I’m sure they exist. And more to the point, at least until COVID came along, Cayman went through serious quantities of high-end alcoholic beverages. There are very, VERY wealthy people here and who visit here who buy for their homes and order in restaurants whatever they please, regardless of price. There are cellars in homes and businesses that can withstand hurricanes. Vino Veritas will bring in and store the world’s absolutely finest wines for you. These same people also have wine cellars in other parts of the world and when they import a $1,000 bottle, they pay $11 on it. Is that fair? I think not. As for the econmomics, there may be more people drinking cheap rum, but if you switched to a percentage instead of a flat rate, the cheap rum would be cheaper which would lessen hardship (don’t say just don’t drink, that’s not the premise of this discussion), and the expensive rum would make up the difference. Miller is absolutely right that, for example, a $600 bottle of wine should not attract just a few dollars in duty; it should attract an amount of duty that reflects the premium price of the product. If you can afford a $600 bottle you can afford a $732 bottle, so let them pay. Let the people with full, custom-built wine cellars pay. Then prices will drop at the lower end. We will not have the ridiculous situation we have now where you go into a liquor store and see a wine for $40 CI that is $20 or $25 US wherever you just came back from vacation. People with more money than sense can pay for the rest of us to drink better and drink cheaper, and they should. And please, don’t bring your millions over to my comment to say ‘why should I pay for your feckless blah blah blah, I enjoy my wine and I’m entitled to do so rah rah rah’ – a serious inequity has been exposed here, and it should be addressed robustly.

    • Anonymous says:

      I can guarantee that if there are any changes the price of a cheap bottle of wine will end up being more expensive than it currently is. How many $200+ bottles do you think are sold? I have seen the same ones sitting in Jacques Scott for years. BTW – I can tell they are the same bottles by the vintage.

    • Anonymous says:

      “the cheap rum would be cheaper which would lessen hardship” – so making alcohol cheaper lessens hardship? Hadn’t appreciated it was an essential sustenance like food. And you honestly think that making it cheaper is a social good that wont lead to increased consumption and even greater hardship?

      Oh and BTW your $40 CI wine example has nothing to do with duty. The duty on a bottle of wine is CI$3.60 a bottle. So even if there were no duty the price would be approx CI$36 – the mark up on mainland prices on win has little to do with duty and a lot to do with control of e local liquor market and the high costs of running a business in Cayman.

    • Anonymous says:

      You obviously don’t know what you’re talking about. Ask a retailer how they apply duty to the prices of products.

    • Anonymous says:

      Or, another view would be to keep it as it is.

      I’m not rich enough to shell out unlimited amounts of cash for just anything. If I want to have a drink of rum, I want to enjoy it, not have to endure stuff that would strip paint.

      The current set up allows me to enjoy a nice quality drink without me getting angry about getting screwed on price too much, which is unlike every other product or service here.

      I’m willing to forego revenue for the government so I can enjoy a nice drink. Literally every other avenue is taxed, so just leave it.

    • Anonymous says:

      It helps to know something about drinkable wine and spirits and basic math. Our tax scheme is reasonable, in large part because it’s $11 fixed not 22%. The Ezzard scheme would make all drinkable wines and spirits over $50, more expensive. A $50 bottle of wine is nice, but it isn’t super break-the-bank fancy either. Whereas a $50 bottle of rum or vodka is fairly run of the mill for name brands, even in Northside. Why would Caymanians, residents, and tourists (when they return) want to propel a dangerous race to the bottom on quality? Does someone in Northside own a distillery in Cuba, Venezuela, or Honduras? Do we want to shutter our own local rum and beer producers? Looking at it from the social welfare standpoint, why would we want to subsidize poverty-alcoholism and domestic abuse/attacks for those drinking more affordable paint thinner and fire starter? Like many ideas Ezzard, it is another wildcard answer to a problem that either never existed, or creates an entirely new catalogue of ill-considered consequences.

    • Anonymous says:

      Isn’t it just the usual suggestions, to tax things that don’t affect me? The trouble with tax is that if people adjust their buying habits because of the price increase, then the tax take falls, they then adjust the thresholds of tax to make up the shortfall and suddenly a ‘rich man’s tax’ becomes a ‘working man’s tax’. It’s also pretty universal to tax alcohol based on volume.

    • Anonymous says:

      If you have to appeal to fairness to justify raising taxes on other people then you just lost the argument. A fixed tax per item is no more or less fair than a fixed % tax on price.

  3. Anonymous says:

    I don\t understand why people are getting upset. You complain about fuel prices and now they’re doing something about it. Oh wait, it’s because the closet alcoholics might have to pay more for a few bottles of Dom Perignon? Boo hoo.

    • Anonymous says:

      Actually, the reverse is true: it’s the poorest alcoholics that seek the cheapest booze, so they can afford more quantity. In this example, spirits >$50/1000ml/33oz, which includes pretty much everything name brand. Tortuga and off-label crap distilleries become the sole benefactors in Ezzard’s socialist race to the bottom on spirit quality. Wines (generally 750ml/25.4oz) >$37.50/750ml would be more expensive. A $37.50 bottle of wine isn’t really all that fancy. We don’t hear anyone screaming for more tetra-pak wines. As it turns out, the poorest alcoholics also suffer other social problems that are not improved with more alcohol.

    • Anonymous says:

      You should have just left it at “I don’t understand.”

  4. Anonymous says:

    $1000 rums??? What is he smoking?

    Excellent, top rated rums can be had for anything between about $40-$200. Anything more than that are real outlying drink prices.

    Rum isn’t anywhere near as ridiculous as whiskey/whisky.

  5. A regular “Joe” says:

    Easy to propose for someone who has been fully paid, not only during lockdown, but, for ages in politics… (their reality always shortsighted ….)

  6. Anonymous says:

    Glad MLAs are so well paid that $1000 bottles of rum are viewed as “not outlandish”.

    • Anonymous says:

      He did not mean outlandish in relation to his means. People need to understand that Caymanians of his generation really do not quite know how to use the English language with precision. Most of these guys are high-school or Mickey Mouse-university educated people who learnt all these big words after getting into government and hearing their colleagues use them in the LA, reading them in documents and surmising what they mean instead of looking them up in a dictionary etc. Ezzard and McKeeva are the worst for this, McKeeva being the absolute worst (his speech is just a salad of words he’s picked up since getting elected). Ezzard meant ‘not unheard of/fanciful’, and used the words ‘not outlandish’ in that narrow sense. Incidentally, the definition of the word ‘outlandish’ is ‘strikingly out of the ordinary’ OR ‘exceeding proper or reasonable limits or standards’. He used the first definition. If there are $1,000 rums then they are not strikingly out of the ordinary, just out of the ordinary, and hence, not outlandish. Even if you use the second definition, outlandish is not the word for a $1,000 rum because who decides what proper or reasonable limits or standards are for a pleasure good and vice which people have vastly different means of affording. But don’t let these nuances stop you from taking a cheap, thoughtless dig at a politician actually trying to make the local lifestyle less expensive, something we’ve been literally begging for, for many years.

      • Anonymous says:

        You are seriously suggesting that $1000 bottle of rum is simply “just out of the ordinary”? Wow.

      • Anonymous says:

        It doesn’t make local lifestyle less expensive, it makes it more expensive. How many name brand bottles of spirits are you buying under $37.50/750ml? Any? Name them.

  7. Anonymous says:

    Something they haven’t screwed up yet. They are looking for more ways to tax things so they can keep making the big bucks.

  8. Beau says:

    Four dollar Rum? Thats the same as the fuel (that is also taxed by volume). This would only encourage Caymanians to drink cheap booze in excess and poison themselves. Leave it alone so people can afford to have a decent drink.

  9. Anonymous says:

    I don’t believe that a flat duty rate on alcohol is going to bring more revenue to government. Having a flat duty rate on vehicles probably explains why there are so few Lamborghini, Ferrari, etc. on island. There is only so much that people are willing to pay to government as import duty on any item.

    Contrary to what Ezzard says, there is a graduated rate on imported boats, which is determined by length rather than value.

    While I certainly would like to see a reduction in my $20 bottle of wine, and I’m not going to purchase a $500 bottle of wine regardless of the duty on it, trying to slap a 22% import duty on alcohol based on the landed price is just more work for all concerned and probably less revenue to government.

    Whether we agree with it or not, Cayman is a tourist destination. The way we set import duties for watches, perfumes, jewelry, and other items that encourage the tourist into spending their money while they are on vacation, we need to acknowledge that alcohol falls into that category as well.

    If we set import duty on fuel according to imported price, the fuel suppliers will take CIG to the cleaners much faster than they are doing right now.

    • Anonymous says:

      Actually there is a differentiated duty on vehicles – there is a substantial kick up in duty rates above a certain value. When I bought an SUV adding 4×4 to the specs only made $4K in acquisition price, but way more in duty, as the acquisition price then crossed a threshold and the higher rate was applied to the entire price of the vehicle.

      • Anonymous says:

        Thanks. But that only proves my point that there are graduated scales for duty for certain goods, and increasing it on vehicles like yours make the 4×4 spec less desirable. So a decent, where “decent” will vary from individual to individual according to their means, bottle of wine, rum, etc. will become prohibitive and government revenue from alcohol will be more likely to decrease under Ezzard’s plan.

    • Anonymous says:

      What can the fuel suppliers do to us? The reason there are so few Lamborghini/Ferrari on island is that there is nowhere to service them. I understand what you are saying but unlike you, I want my $20 bottle of wine to be cheaper more than I care how much a tourist pays for a $500 bottle. (Actually, to be specific, I want the $20 bottle to be $10 so I can buy better wine for the same price). If they can pay $500 they can pay $600. They already pay huge sums just on the food. A main course in one of our tourist traps can be $40 CI – this is almost $63 Canadian for some overcooked pepper-crusted tuna with flavourless blanched vegetables and stolid mashed potato. But they come and they pay it, and they come back again. Also how about we ask the duty-free retailers how many watches, perfumes, jewellery and other items they are selling to tourists even at the current prices? If you’re saying they would buy a Rolex even less than they already don’t buy a Rolex, I would agree with you, but your point would be redundant. They aren’t buying, just like you aren’t buying a $500 bottle of wine. How is that an argument for not increasing the price for those who would and can and do pay? Moreover, what about the merely well-off or even ‘American middle class’ who visit us and balk at our prices? Have you never overheard a tourist in a supermarket calling their spouse over to show them the 3x markup on something they buy in Publix? I once met a Frito-Lay representative in Kirks who was just standing there staring at Doritos prices. He was absolutely astonished – and didn’t buy one bag. Most tourists here are trying to have a good, safe time without breaking the bank, and it isn’t easy. Wouldn’t they like to visit next time and see that they can now afford the same wine they drink at home, instead of having to get something not as good because “Cayman is expensive”?

      • Anonymous says:

        If they can pay 500 they can pay 600? Seriously? Wow. Ignoring your obvious lack of understanding of basic economics that’s a really pathetic attitude.

    • Anonymous says:

      You do realize that your $20 bottle of wine will actually become cost less? The point is that the $500 per bottle purchaser should be paying more. Consumption tax. No different that different cuts of meat.

      • Anonymous says:

        Interestingly your $20 bottle has $3.60 of tax on it on the current fixed tariff system. That would make the price net $16.40. Tax at 22% on $16.40 is – $3.60!

      • Anonymous says:

        Enjoy your tetra-pak wine…all your name-brand spirits over $37.50/750ml would cost more…because mathematics.

  10. Anonymous says:

    Because $5 bottles of rum are obviously a really great idea with no possible adverse social impact at all.

  11. Anonymous says:

    If this is changed you will see no name rum everywhere as Appleton and Bacardi would be back bar only and $15 a drink in place of $5

  12. Anonymous says:

    When we come to Cayman, everyone including children is assigned their maximum duty free amount of liquor and wine to bring in. You can save half to three quarters off the Cayman liquor store prices, and for a party of 8 or10 it amounts to hundreds of dollars.

  13. Anonymous says:

    Next inevitable step: allow retail cannabis sales. 11% sales tax for locals, 22% sales tax for residents. Divert the revenue to NAU, RCIPS, schools, etc as other legal places have.

    No license required for <10 flowering female plants. Or, we can continue to support a lucrative black market that brings in guns.

    • Anonymous says:

      Ah yes bring the expats here and tax them higher than locals….let’s encourage more work permits because government loves money…and you know what comes next? More caymanians crying about jobs. So, do you really want that?

  14. Anonymous says:

    Ain’t no duty on a 345 or nice bottle of Cayman Ice.

  15. Anonymous says:

    If they charge duty on wines based on price, I’ll virtually stop going to restaurants other than for takeout or maybe a wine-free dinner. Restaurants will be for the rich even more than they are now. The mark-up on wine at a restaurant is already outrageous – in some cases triple retail – and this will only make the problem worse.

    • Anonymous says:

      Eating out is overrated entirely. Nothing beats Home cooking for me

    • Anonymous says:

      And wines in the store are often 2 – 4 times more expensive than they are in the UK. Absolutely crazy!

    • Anonymous says:

      As you yourself said, their markup is what drives the cost up, not the duty. – We know what the bottle, or banana, costs us retail, so we know how much they mark up. The cost in eating out isn’t in the duty, its in the service. (Compare a fast food hamburger to a slow service hamburger. Yes the quality changes, but not as much as the cost does.)

    • Anonymous says:

      Classist comment in my opinion. Youre saying that people who cant afford to go out to restaurants should continue subsidizing the cost of more expensive liquor so that you can continue to afford your dining out lifestyle?

    • Anonymous says:

      You really are an idiot.
      Right now your $30 restaurant wine is about 1/3 at wholesale, or $10.
      With duty being $3.30 per liter on wine, about $2.50 is duty on a 750ml bottle.
      Allowing for retail profit being say 25% of the price, this is probably $5 a bottle.
      The same bottle with Ezzard’s proposal would be $5 plus $.50 in shipping.
      Add 22% or about $1.20 and it is now $6.70.
      So allowing for a similar profit margin it would be around $8.90 wholesale.
      Triple that to the restaurant and now your $30 wine is $26.70 – over 10% less.
      How does that make going out for a reasonably priced meal and wine cost more again?
      Those wanting the more fancy wines would pay more, yes. And that is a consumption based tax.
      But I am guessing you would be prefer to whine and dine at home (and please do, save us the headache complaining) than wine and dine out….

    • Anonymous says:

      How? Your entire comment – how?

  16. Anonymous says:

    11:53, Give me a break. You can afford the duty if you drink Dom Perignon regularly.

    • Anonymous says:

      The fallacy is that the people that bathe in Dom or cook through $1000 bottles of Rum, don’t exist in the quantities necessary to offset Ezzard’s poor man thesis. Booze costs will just go up for the middle class majority, and small relief for minority that drink plonk and fire starter.

  17. Anonymous says:

    They might think twice when it affects them too. Everyone needs fuel to get around, use public transport, free Let’s Eat delivery, shipping etc. and everyone needs a little rum and wine on the side too

  18. Anonymous says:

    Hey, leave my Dom Perignon alone!

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