Work permits and the government budget

How can we trust Cayman Islands officials to pursue immigration policies that favour Caymanian workers over expatriates when the government is so dependent on revenue from work permit fees? 

That line of inquiry has cropped up quite often during this election season. And the questioners do indeed have a point – out of the $558 million that government expects to collect in so-called “coercive revenue” during this budget year, some $69 million or so is coming from fees for work permits, permanent residents, term-limit extensions, etc. 

That’s more than the government collects from banking and trust licences ($33 million) and gasoline and diesel duty ($34 million) combined.  

Work permit fees 

Some people believe that each work permit holder represents one Caymanian that otherwise would be employed. What would it mean for government’s coffers if every single Caymanian had a job? 

If you assume that each additional employed Caymanian would result in one expatriate leaving the Islands, then that would impact government’s work permit revenue – but maybe not as much as you might assume. 

According to the 2012 Labour Force Survey released in mid-April, the total labour force of Cayman was 38,811 people – including 18,418 Caymanians and 20,393 non-Caymanians. There were 1,925 unemployed Caymanians and 485 unemployed non-Caymanians. 

The total number of employed people was 36,401 – including 16,493 Caymanians and 19,908 non-Caymanians. 

If those 1,925 unemployed Caymanians all earned jobs currently held by non-Caymanians, then 17,983 non-Caymanian employees would remain in the country. That’s a nearly 10 per cent decline in non-Caymanian employees. 

Assuming that the group of displaced non-Caymanian employees is a representative sample of the country’s range of occupations (each carrying a different work permit fee), then the 10 per cent decline in non-Caymanian employees would lead to a 10 per cent decline in work permit fees collected overall – or a decrease in government revenue of about $7 million. That decline in government revenue would theoretically be mitigated by decreased government spending on social services. 

 

Consumption fees  

While some look at an employed expat and see an unemployed Caymanian, others argue that having a high number of work permit holders is an indication that the country’s overall economy is doing well. According to that reasoning, the more people in general that are in Cayman, the more services and products are being demanded (i.e. food, goods, housing, entertainment, etc.), thereby creating more job opportunities for Caymanians and expats alike. In other words, a rising tide lifts all boats. 

From a government revenue perspective, the accumulation of fees and duties on consumption makes up a far greater portion of the budget than strictly work permit fees. In addition to the aforementioned $34 million in gasoline and diesel duty, during this budget year the government expects to raise more than $86 million from import duty, $17 million from alcohol duty, $6 million from tobacco duty, and $35 million in stamp duty on land transfers, for example. 

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