KINGSTON, Jamaica - The Cayman Islands is scrapping a plan to impose a direct income tax on thousands of expatriates, including Jamaicans, working in the British Caribbean territory that is famed as a no-tax financial centre.

Premier McKeeva Bush issued a terse statement late Monday saying that his proposed tax was “off the table and will not be implemented”. He did not say what alternative revenues might replace it.

The islands’ leader said only that his administration was “satisfied that many of the commitments from the private sector” will meet his demands for a new source of revenue for the government that won’t hit the poorest citizens. He has been huddling with business leaders in recent days.

Zero direct taxation, friendly regulations and the global money they lured have transformed the tiny British territory into the world’s sixth largest financial centre, with US$1.6 trillion officially booked international assets.

Bush announced in late July that he planned to impose a direct tax on expatriate workers’ income September 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.

Yesterday, many expatriates were still left guessing about what the new revenue measures would include.

“The only reaction is confusion as the uncertainty continues. At least he has removed this one tax that would have been our death sentence,” said Grand Cayman real estate broker Kim Lund, who added that several deals fell through after Bush announced the tax plan.

Some wealthy expatriates had said they planned to leave Grand Cayman, where accountants, lawyers and other skilled professionals work in coastal offices looking out on clear, blue seas.

Eden Hurlston, a local man who was a vocal member of a roughly 11,000-member Facebook group called “Caymanians & Expats Against Taxation”, said he believes the controversy over the scrapped tax has helped people on the islands realise they can demand more accountability from their leaders.

“The people spoke and the powers that be had to listen,” said Hurlston, who works in the islands’ entertainment business.