Various fees that non-Caymanian workers and the companies employing them must pay for the right to work in the Cayman Islands are being undercharged in a number of cases, according to a review by government’s Internal Audit Unit.
The review, conducted for the calendar year 2009 but which has just recently been made public, revealed “assessment discrepancies” resulted in the Immigration Department undercharging companies for work permit fees, and also undercharging permanent residence-holders who are issued right to work certificates.
“Based on our review it is estimated that these assessment discrepancies have resulted in the department undercharging employers $288,450 in work permit fees,” the audit report read, adding its number was gleaned from a review of only 200 work permit applications where 66 – just under a third – had not been properly assessed government fees.
The Immigration Department disagreed with that figure from the audit unit and put its own estimate of under-collection at just more than $112,000.
“It is reasonable to infer that the total amount could be significantly higher across the entire population of work permit grants and renewals,” auditors stated.
According to the most recent work permit statistics available, from early October of this year, there were some 14,220 workers here that held work permit grants or renewals. If more than 4,600 of those permits were not assessed correctly, it would be reasonable to state that the Immigration Department is losing millions each year on work permit transactions.
Work permit fees are charged per job category based on an elaborate listing of employment positions that are held throughout the Cayman Islands. If a particular type of job is not listed, the chief immigration officer’s approval is required to determine what work permit fee should be charged.
In its review of the 66 work permit transactions where discrepancies were found, the Internal Audit Unit discovered some work permit applications were simply charged the wrong fees. Also, where regulations didn’t specifically state what work permit fees should be, auditors found decisions being taken relative to those fees without the chief immigration officer’s approval.
At the time of the review, the director of finance accepted that only 33 of the 66 work permit transactions identified by the Internal Audit Unit had been inaccurately assessed.
Similar inaccurate assessments happened with non-Caymanian individuals who were granted permanent residence with the right to work during 2009 auditors found.
According to immigration regulations, people who are granted permanent residence are required to pay an “issue fee” depending on how much that person earns each year. Fees vary from $500 for people making up to $20,000 per year; to $6,000 for those making above $100,000 a year.
What occurred in several cases reviewed by internal audit was that the issue fees were set only on a person’s base salary, not what they actually earned.
For example, one permanent residence-holder who earned a $60,000 a year salary paid $2,000 for their issue fee. However, that person also earned an additional $40,000 as part of their company’s business profits. Therefore, the fee charged should have doubled to $4,000. In another case a salesperson’s salary was $60,000 per year, but $15,000-$20,000 in commission earnings was not reported, leading to an undercharge of $1,000.
“Based on the fee assessment anomalies … the Immigration Department has inadvertently foregone revenues,” auditors noted.
In the report, immigration officials noted changes to the regulations and staff training will allow for the proper collection of work permit and permanent residence fees in the future.
Chief Immigration Officer Linda Evans revealed last year that government auditors uncovered a $2.5 million problem in collecting annual permit fees from permanent residence-holders on the Islands.
These are fees that must be paid each year – either by an individual or their employer – after that person obtains permanent residence with the right to work.
“This [$2.5 million figure] included approximately $400,000 for persons who have left the Island over a year ago,” the Internal Audit Unit report stated. “In one case, we observed an individual was allowed to accumulate an outstanding balance of $97,000 over a five-year period but has since left the Island.”
Ms Evans said at the time it was unlikely government would ever recover all of the PR fees owed and that some would have to be considered “bad debt”. However, the Immigration Department has since made strides in collecting hundreds of thousands of dollars worth of annual fees from permanent residence-holders, many of whom Ms Evans said didn’t realise they had to pay anything.
The confusion was partly due to the fact that the Immigration Law requires businesses employing work permit-holders to pay annual fees on behalf of the worker. The law does not require those payments once a person receives permanent resident status.
By the end of 2010, the Immigration Department was still chasing more than $1.5 million in annual PR fees, according to auditors. Recommendations were made in some cases to the Caymanian Status and Permanent Residency Board to revoke the residence rights of those individuals who had left the jurisdiction for a continuous period of more than 12 months and who had not paid the annual fee.