Tourism tax loss overshadowed by financial charges
(CNS): The public treasury lost about C $ 17 million in lodging and cruise ship taxes in the first quarter of 2021 due to border closures and the closure of the Cayman tourism sector. However, revenues from the offshore financial sector more than made up for this lost revenue for the government.
Private Fund Fees, a new unbudgeted revenue stream first collected earlier this year, brought in $ 44.8 million, according to the latest unaudited financial report released by the Cayman Islands government last month, reflecting how critical the sector is. has been in public coffers and the national economy during the pandemic.
Even without accounting for income from work permit fees paid by finance employers, the industry generated more than $ 250 million for public money in the first three months of the year.
CIG’s revenues in the first quarter of 2021 were nearly 16% higher than in the first quarter of 2020, a period before the lockdown and after a record quarter for overnight arrivals when the government was at its peak of revenue. Nonetheless, after a year of the pandemic, revenue streams for the start of 2021 appear to surpass what was set to be a record year for government revenue.
Most of the financial sector fees are collected in this first quarter, but the report shows that the government also collects more taxes in other ways that are expected to offset the loss in tourism revenue in the second quarter.
The stamp duty on real estate transactions stood at more than $ 21 million, or $ 9 million more than expected in the first quarter of 2021. And despite the global pandemic, it appears that real estate sales here continue to beat rates. records, April and May being on the way to surpass the previous months. . As the number of transactions and value increases, this revenue stream will likely cover a significant portion of what the government would have earned in the second quarter from hosting taxes.
According to the report, national levies on goods and services were more than 22.3% higher than forecast.
While import duties declined slightly and work permit fees also underperformed in the first quarter of 2021 by $ 3.7 million and $ 2.7 million, these losses remain well below gains in other areas, which keeps the government in the dark.
The IGC remains cautious, however, due to the need to continue supporting displaced tourism workers and supporting small businesses, as the tourism sector is not expected to experience a noticeable recovery until the end of the year.
When statutory authorities and Crown corporations are also taken into account, the overall fiscal performance reported for the period shows a surplus of $ 202.6 million, which is 27% more than budgeted.
Compared to the first quarter of 2020, central government revenues are up more than 14.4%, but spending is now higher than expected. Since most of the money raised by the government arrives in the first quarter, the $ 393.4 million earned in the first three months of this year is not expected to be repeated, although spending is expected to remain the same and might even increase.
“The first quarter performance has positioned the government to be optimistic about its performance for 2021,” a finance ministry official wrote in the report, but concerns remain. “This will be greatly affected by the economic effects of spending related to COVID-19 and the decline in tourism-related income and local economic activity due to the prolonged border closures.”
While government revenues appear to remain strong through alternative revenue sources to tourism, its dependence on the financial sector is increasingly apparent. Unlike the 2008 economic crash, the pandemic did little to undermine the success of this industry.
However, there are a host of issues Cayman continues to face that threaten this success. These include Cayman’s own failures in meeting criteria set by the Financial Action Task Force and other international regulatory standards, and developing policies in onshore countries, such as a tax global company over which Cayman has little control, indicating the new PACTE government must be as committed to reducing the risks to the financial sector as it is to reopening borders.
See the full economic report in the SNC Library.