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Let there be no mistake.  Work permit fees are a payroll tax, albeit one that is arbitrary and regressive.

Arbitrary, because permit fees are based on job titles which are themselves arbitrary, rather than salaries which are objective.

Regressive because they cost pretty much the same whether a company is a multi-million dollar bank or a “mom-and-pop” service provider, whether the company makes a profit or a loss, and whether the employee earns US$50,000 or US$500,000 for himself or his employer.

It struck me as soon as I heard the plan to tax expats only, why not simply increase work permit fees?  (Not that I was in favour, just that it was an easier means to the exact same end).  Well, that’s what they did.

Strange that everyone saw the “community enhancement fee” for the payroll tax it was while for years everyone has seemed content with “work permit fee”.  What’s the difference?

In terms of its effect on Cayman’s reputation, the latest proposal is obviously an improvement.

But my main concern with the original proposal was not its potential to scare away people, but its potential to scare away jobs.  Increasing work permit fees has been one of the main factors in the malaise that has afflicted much of Cayman’s financial sector and the near-demise of the fund admin sector in particular.  In that respect the jury is out on whether this latest proposal will do less harm than the last surely would.


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