EDITORIAL – Immigration: Government’s third largest revenue source

When listening to talk radio or perusing the (largely anonymous) comments sections of local websites, it is not unusual to come across the following argument against the expatriate half of the Cayman Islands population: Foreign workers contribute little to the country’s economy.

That of course, is obviously untrue and easily refuted. We could fill this editorial space with explanations, examples and evidence of the mutually beneficial symbiotic relationship between Caymanians and non-Caymanians.

But today’s front-page story on the government’s new budget presents the opportunity to refute that argument using a single round number – $100 million.

That is how much the government expects to collect each year from immigration-related fees levied, by definition, only on “foreigners.”

Those fees – including for work permits, permanent residence applications, visitor work visas, etc., – are expected to comprise about 15 percent of central government’s revenue over the next two years. Typically, immigration fees are the third-largest revenue item in the budget, behind only import duties and fees for the financial services sector.

Simply put, without those immigration-related fees on foreign workers, the government would find it extremely difficult to provide essential services – many of which (such as public education and social welfare) are not made available to those same foreign workers. (If you factor in foreign workers’ share of taxes that are levied on the entire population, such as import and stamp duties, it would be impossible for the government to function anywhere near its current level.)

That being established, the same voices who argue that foreign workers do not contribute to Cayman are also known to put forth a second argument: Government has grown too reliant on immigration fees, and Cayman officials are inclined to discriminate in favor of foreign workers, against Caymanians.

There is a kernel of truth in that statement – but only up to the first comma. Yes, in our opinion government is far too reliant on immigration fees, but no, Cayman’s government does not give preference to non-Caymanians over Caymanians. To belie that fantasy, simply look at the Byzantine system of nit-picking and nickel-and-diming that often engenders significant delays in hiring for critical positions. Or recall the approximately 1,000 applicants for permanent residence who have been waiting for months or years for decisions on their immigration status.

The bottom line is, government has no business treating the “immigration business” as a cash cow for the public coffers.

First, there is a danger of government being addicted to fees for foreign workers – because that dependency is an active impediment to changing existing fee structures or streamlining processes.

Second, Cayman’s system of immigration taxation is inherently unfair. Not only are those fees levied on one half of the population, but within that base the fees are distributed with little consistency or reason. While work permit fees are higher for people in certain industries that tend to have higher salaries (such as law and accounting), the reality is that Cayman’s work permit fees are not determined according to income – but according to job title. The amount of subjectivity involved is incredible, illogical and unacceptable.

Third, while immigration fees are linked to individual foreign workers, the majority of the fees (particularly for work permits) are actually paid by employers. Those fees are absorbed into the overall “cost of doing business” and, like all costs, are passed on in the form of higher prices to the country’s consumers.

That means everyone who visits, lives in or does business in Cayman, regardless of residency, nationality or immigration status.