Starting today, the import duty on cigarettes is going up by $2.10 per pack of 20, representing a 100 per cent increase in duty, the Premier’s Office announced Friday afternoon.
Additionally, the import duty rate on alcohol in the Cayman Islands will increase by 30 cents per litre for all alcohol, including ale, beer, wines, champagne and spirits, according to a news release.
“I don’t think it’s a very wise thing. I think the cost of living for people is already high. At this point, any kind of heavy taxes in that area is just going to make people’s lives that much more miserable,” said businessman Osbourne Bodden, who owns a liquor store, gas station and fry fish hut in Bodden Town.
In addition to the duty increase on cigarettes and alcohol, the Cayman Islands government will now charge a $100 inspection fee on all cargo containers and a fee of $2 per 100 pounds (or part thereof) on all loose cargo and packages.
Jacques Scott Group Managing Director Peter Dutton said he was aware that an increase in tobacco and alcohol duty was coming soon, but he had no idea what the specific increases would be. He said he would have to crunch the numbers before he could gauge the potential effects on his business.
The prevailing market rate for a pack of 20 cigarettes is about $6, including $2.10 in import duty. Starting today, the import duty on a pack of 20 cigarettes will be $4.20. If stores pass on the entire duty increase to customers, that means the market rate for a pack of 20 cigarettes will be more than $8.
(In the airport’s duty-free shops, the current price for a carton of 10 packs of 20 cigarettes is about US$31.)
The current duty on cigars is 102 per cent of the value of the cigars. The duty on chewing tobacco (typically sold in packages of about 1.3 ounces) is $1.49 per pound.
Compared to the cigarette duty hike, the increase in duty on alcohol is relatively modest. The import duty on ale, beer and cider increases from $1.65 per litre to $1.95 per litre.
However, the more modest increase didn’t stop a number of local retailers from making a run on alcohol products, mainly beer, looking to stock up ahead of Monday.
“What we saw [Saturday] is a run on liquor from the distributors to the retailer,” said Matt Bishop, general manager of the Cayman Distributors group. Cayman Distributors and Jacques Scott are the two largest alcohol distributors on Island.
Mr. Bishop said he would expect to see most retail prices on alcohol put up around the Islands sometime this week, although he said some businesses may try to stave it off for as long
as they can.
“In the current economic climate, it’s going to be very hard for retailers to hold their prices,” Mr. Bishop said.
“It’s often easy for government to look at taxing alcohol,” he added. “But on an island like Cayman, where our bars and restaurants ... contribute so much to our community, we feel that continually increasing import duty on beer, wines and spirits is both punitive and will have a detrimental effect on our broader economy.”
Mr. Bishop said Cayman Distributors would likely have to shutter its bonded storage warehouses on Monday to allow customs officers to come in and perform a count of existing merchandise prior to the import duties being raised.
By the numbers
The effective increase in the price of imported beer is equivalent to the 10-cent fee on bottles and cans of beer (usually 12 ounces) announced 8 August by Cayman Islands Premier McKeeva Bush during a meeting in Red Bay. At the same meeting, Mr. Bush also mentioned increased fees on tobacco products.
However, the import duty would not appear to apply to locally-produced alcohol products.
The duty on table wine increases under the new import fees from $3.30 to $3.60 per litre; the duty on champagne increases from $10.50 to $10.80 per litre; and the duty on spirits (containing less than 50 per cent alcohol by volume, or 100 proof) increases from $11.55 to $11.85 per litre.
Mr. Bodden said the increase in alcohol duty sounded “more manageable” than the cigarette duty hike, but he said it will probably impact the cost of dining out.
“I understand they’re trying to stamp out smoking and drinking, but they’re making the cost of doing business higher,” he said.
He said it’s already expensive to live in Cayman and that’s compounded by high unemployment and a tough business environment.
“Government itself needs to control its own spending,” Mr. Bodden said.