2011 Budget: Payroll Tax to be Rolled Back

February 18, 2011

During her presentation of the 2011/12 Budget this morning [Feb 18] in the House of Assembly, Premier and Minister of Finance Paula Cox said that payroll tax would be rolled back, which would return approximately $50 million of spending power to taxpayers in 2011–2012.

The Premier said: “This was not an easy decision given the Government’s soft revenue position but it was considered the best option for injecting some stimulus into Bermuda’s economy.”

A portion of Premier Cox’s statement in relation to the payroll tax is below:

Accordingly, the standard rate of payroll tax is to be rolled back to 14 percent in 2011–2012, an adjustment of two percentage points. There will be a similar adjustment of two percentage points for the majority of other rate categories.

While the salary cap in the payroll tax structure will remain at $750,000 in 2011–2012, the rate of tax recoverable from employees will be reduced from 5.75 percent to 5.25 percent.

I can also confirm that the relief from payroll tax for the hotel sector, as set out in a Memorandum of Understanding between the Bermuda Hotel Association and the Ministry of Finance, will be extended to 31 March 2012.

Additionally, the relief provision of a reduced payroll tax rate for retail establishments during the months of January, February and March will continue in 2011- 2012. Customs duty relief measures on capital goods for a number of sectors including the retail sector will be extended beyond March 31, 2011. These particular measures relate to refurbishment of premises, new retail space and local manufacture of goods.

Most other tax rates will remain unchanged except for a minor change in the customs tariff and government fees including an increase in cellular phone licences.

I have mentioned the need to foster hope and provide help for the hurting. In this respect I am pleased to report that Government is to develop a pilot programme that will allow businesses that are in arrears with respect to payroll tax, but who are maintaining installment payment plans, to reduce their debt to Government by offering services of like value.

The payroll tax reductions I have outlined will return approximately $50 million of spending power to taxpayers in 2011–2012.

This was not an easy decision given the Government’s soft revenue position but it was considered the best option for injecting some stimulus into Bermuda’s economy.

The economic impact of the payroll tax roll-back will touch all sectors of the economy including hospitality, construction, retail, international business and local manufacturing. The hope is that jobs will be retained and where businesses are stronger, more jobs will be created.

The fiscal impact of the payroll tax cut will widen the deficit by a similar amount but the overriding consideration is that businesses and workers need the assistance now to help them through the final stages of the recession. This is the essence of resetting the dial to win the future.

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Comments (8)

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  1. sandgrownan says:

    It’s actually a “do nothing” budget. Nothing substantive except rolling back payroll tax. Nothing else. Nothing.

    Talk about head in the sand politics – Cog is ineffectual and incompetent.

    • Robert Bryce says:

      It looks like an pre Election Budget. As an aside, a large part of the $50m payroll tax handback will stay within exempt companies who pay their employees tax. It will not all flow into the economy.

      • itwasn't me says:

        Its still too soon to call an election. Payroll tax rollback was a must-do to keep the remaining exempt companies here (they don’t vote here). Every other budget cut affects voters. They’ve built enough houses to secure votes. They’ve retained all civil servant and blue colour jobs, no win/loss there.

        • Bermudiana in an exempt worl says:

          They may not vote but they employ Bermudians such as me who do.

  2. Not Surprised says:

    Is that It? Is that the entire budgett? Is government meeting again this afternoon?? Roll Back of Payroll tax, ok…… what else?? Is duty going up to the private person? What about alcohol and ciggarettes??? Huh? Is that still to come?? I’m totally lost…..

    • sandgrownan says:

      It really is do nothing. It’s a budget of hope – hope things get better. i wonder if she really does believe that this isn’t her fault?

  3. bill says:

    remember she is not only the Premier, she is also the Finance Minister….that means that anything in this budget is subject to change at any moment.

  4. Triangle Drifter says:

    So, we go into debt to the tune of another Berkley in one year & there is nothing to show for it. The huge civil service stays huge. The waste goes on.

    If there was just an ounce of honour in them the whole lot would resign for the financial mess they have created.