The Cayman Islands could ease its fiscal dependence on work permit revenue through a progressive property tax on foreign buyers, according to economist Marla Dukharan.
In her 7 July report, ‘Population, progress, and the people of the Cayman Islands’, Dukharan describes a work permit-driven “incentive loop”.
This encourages growth of a high-wage, non-Caymanian population as a source of government revenue, she explains.
The report reveals that over a decade, revenue from work permits fees nearly doubled in Cayman, jumping from CI$77 million in 2014 to $138.9m in 2024.
The result has been population growth sustained by foreign labour and a population nearing 100,000 residents.
With the fastest annual population growth rate in the Caribbean, standing at 1.78%, Cayman might look to Manhattan as an example of extreme population density, Dukharan suggested.
“If you decide you want to be Manhattan, then you’re going to get lots and lots of revenue from work permits for the people that you allow in, provided they want to come,” she told Cayman Independent.
“But if you decide you don’t want to be Manhattan, then that money that the government is used to collecting and the government is used to spending, and people are happy to receive by salaries… that revenue is not going to be flowing the way it is now.”
Progressive property tax
Dukharan suggested that to break the incentive loop driving unplanned growth, the Cayman Islands Government will need to look at alternative sources of income.
“I would not jump to say that you need an income tax,” she said.
“I would say that you need a tax framework that is not regressive, and I think that Cayman should consider a property tax, but not on Caymanians, on foreigners.”
She described land as akin to a barrel of oil – a finite resource that, once sold to foreign buyers, is unlikely to return to Caymanian ownership.
“It should be treated like a barrel of oil that never comes back, and it should be taxed accordingly,” she said.
“I would make that progressive as well, meaning the higher the value of the property, the higher the tax burden, as opposed to a flat property tax.”
Cayman Independent contacted immigration minister Michael Myles for comment on the work permit incentive loop but did not hear back before press time.
