In a bid to stimulate the island’s stagnant economy, the Premier yesterday [Nov. 25] formally introduced measures in Parliament increasing the rate of duty payable on accompanied goods imported for personal use from 25 percent to 35 percent.
In addition, the $100 duty free allowance for returning residents will be restricted so that where two or more members of the same household return to the island on the same aircraft or vessel, only one may claim the allowance.
“These measures are intended to discourage personal spending abroad, and to help steer expenditure into the local retail sector, thereby boosting sales and keeping approximately 4,000 Bermudians employed in local stores,” she said.
The Premier said the ongoing effects of the 2008 worldwide recession continue to stymie business growth on the island.
“As a result, business activity in Bermuda has been slow to recover,” she said. “In fact, in many instances scaling back by some businesses and the associated redundancies are taking a debilitating toll on many Bermudian families.
“This is a serious matter and required an immediate response.”
The Premier’s Statement Appears In Full Below:
Honourable Members are requested now to give consideration to the Bill entitled ‘Customs Tariff Amendment (No. 3) Act 2011’.
The primary purpose of the Bill is to increase the duty rate on accompanied personal goods declared by returning residents from 25% to 35%.
Mr. Speaker, the Bill is also intended to restrict traveller’s allowances for returning residents to one person per household per trip for a five month period ending on 31st March 2012.
Mr. Speaker, the changes affect section 5A and Chapter 98 to the First Schedule of the Customs Tariff Act 1970, which I will refer to as the Principal Act.
Honourable members will be aware that these amendments took effect from the date on which this Bill was tabled in this honourable House – the 4th of November this year – in accordance with the Provisional Collection of Duties Act 1960. The changes will continue in force subject to the agreement of this Honourable House.
Honourable members will recall that in a press conference on the morning of September 30th this year, I noted that the negative impact of the recession which followed the global financial and economic crisis that began in 2008 continues to hinder business growth and development in Bermuda. As a result, business activity in Bermuda has been slow to recover. In fact, in many instances scaling back by some businesses and the associated redundancies are taking a debilitating toll on many Bermudian families. This is a serious matter and required an immediate response.
Therefore, in taking note of this continuing economic malaise and the possible social consequences, Government immediately began to implement several temporary emergency measures to assist businesses that have a pressing need for financial relief.
Mr. Speaker, the retail sector has been particularly hard hit by the continuous decline in sales volume over the last several years. Discussions with industry leaders have been bleak but sobering. The Government is very much aware of the pressure on the retail sector and in this regard in 2010 a payroll tax concession was established for retail stores for the months of January, February and March, recognising that this is a slower period for retail.
Mr. Speaker, also in February this year the Government extended the Retail Shops (Temporary Customs Duty Relief) Act 2008 by a further five-year period expiring on March 31, 2016. This Act provides a zero rate of customs duty on imported capital goods intended for the renovation and refurbishment of retail shops. This exemption has been in effect since April 1, 2008 and many properties have benefited from the Act. Since inception the total value of goods receiving exemption under this concession is approximately $1.7 million. This represents about $420,000 in customs duty savings for shop owners.
Mr. Speaker, with the prospect of immediate layoffs in the mainly Bermudian retail sector, it was important that further remedial actions be taken to assist the retail sector.
Therefore, the following measures were announced for implementation:
- Payroll tax was set at a zero rate for the retail sector for a six month period ending on 31st March 2012
- Travelers’ allowances for returning residents will be restricted to one person per household for a six month period ending on 31st March 2012
- The duty on accompanied goods declared by returning residents will be increased from 25% to 35%
Mr. Speaker, included in this basket of rescue measures are the amendments to the Principal Act set out in the Bill before us. These measures are intended to discourage personal spending abroad, and to help steer expenditure into the local retail sector, thereby boosting sales and keeping approximately 4,000 Bermudians employed in local stores.
Mr. Speaker, whereas formerly Bermuda residents returning to the Island by air or sea had been entitled to import accompanied personal goods to the value of $100 without payment of duty, this allowance has now been restricted so that where two or more members of the same household return to Bermuda on the same aircraft or boat, only one may claim the $100 allowance.
Mr. Speaker, I should explain that “members of the same household” means, persons living in the same residence, regardless of whether or not they are related; and so includes persons living in the same residence due to an employer-employee relationship, a house-sharing arrangement, or for any other reason.
Mr. Speaker, I would take the opportunity to emphasise that the $100 allowance restriction is intended to be of limited duration and will end on 31st March 2012.
Mr. Speaker, I should also point out that other duty free allowances available to arriving passengers are unaffected by this change. For example, each passenger is still entitled to import one litre of wine, one litre of spirits, 0.5kg of tobacco, 50 cigars and 200 cigarettes without payment of duty every time they arrive in Bermuda.
Mr. Speaker, I now turn to the new 35% duty rate for accompanied goods. While most accompanied goods are caught by the up-rated duty, ‘zero-rated’ goods are unaffected by this change – these goods (such as books, medicaments, spectacles, hearing aids and medical appliances) will remain dutiable at 0%. The duty for accompanied personal cigarettes will also remain unchanged at the rate of $35.00 per carton of 200. Nor does the duty rate increase applicable to passengers affect importers of commercial goods. Goods imported for retail sale or goods for use in a trade or industry remain dutiable at the applicable First Schedule duty rate.
For the avoidance of doubt, there has been no change to the Customs Traveller Declaration (CTD) form. Arriving passengers will continue to make their CTD in accordance with the guidance on that form. Likewise there will be no change in the currently available methods of paying duty. Arriving passengers will continue to have the option of paying import duty in excess of their allowances at either the customs cashier window or online by Automated Teller Machine or Kiosk.
I shall comment further on these provisions in Committee.
Thank you Mr. Speaker.