Next Budget: Options Under Review

December 13, 2011

The Bermuda Government’s Pre-Budget Report released yesterday [Dec.12] contains a list of revenue-raising  policy options under consideration for 2012-13 including rolling back tax breaks for some pensioners, hotels and restaurants.

The report says Government will consider changes to the hotels and restaurants payroll tax relief, Pensioners’ Land Tax Exemption, look at making changes to the Senior Vehicle Licence system to make it less open to abuse, consider taxing vacant land and financing most of future borrowing requirements locally in Bermuda dollars.

Government will also examine changes to duty on personal imports, possibey changes to the Betting Tax, an increase in “sin taxes” and reducing the annual cost of ownership for fuel efficient vehicles.

“The Government emphasises that the policy options listed above are for discussion purposes and that no decisions on any of the above for the 2012-13 budget have been made,” said the report.

“During the month of January, the Government will hold public meetings on the above policy options to encourage public debate and discussion on the priorities for the 2012-2013 budget. The Government welcomes feedback on this report as we look to involve as many as possible in the Open Budget Process.”

The relevant portion from the Pre-Budget Report follows below:

The following are considerations for inclusion in next year’s budget. One of the main objectives of a Pre-Budget Report is to provide a document that elicits discussion from stakeholders. Prior to finalising the budget, the Government will hold public forums and meetings with stakeholders and discuss the ideas outlined below.

Harmonising Duty for Personal Imports

There are different rates of duty that are assessed to individuals who import items for personal use. At the airport the rate is 35% however via other methods of import, the rates vary from 5% to 33.5%. Because of the inconsistent duty rates across methods of import, Government efforts to support local business are not as effective as intended. Therefore the Government will examine changes to duty rates for personal imports.

Changes that harmonise rates must be done in a way to ensure that those who import goods for business use or for resale do not face additional requirements and additional “red tape”. The Government continues to remain committed to supporting local retail and is looking at a way to ensure that the correct balance is struck.

Possible Changes to the Betting Tax

The current betting tax rate of 18% is very high compared to other countries. Government is considering a reduction of this tax as it may stimulate more betting transactions being based in Bermuda.

Increases in Sin Taxes

When finances are tight, there is a regular clamour by the public for increased taxes on “sin” items such as alcohol and tobacco. The Government is considering raising these taxes but is mindful of the effect that increased alcohol prices may have on our tourism industry and nightlife.

Biennial Fee Increase

The biennial fee increase is scheduled to take effect this year. Additionally the Government is looking at changing its fee structures to reduce the annual cost of ownership for fuel efficient vehicles. It is thought that changing the basis of the annual vehicle licence from the dimensions of the vehicles to the fuel efficiency of the vehicle will promote purchases of energy efficient vehicles. This change is planned to be revenue neutral. However, to prevent vehicle owners from seeing a sudden rise in licensing cost, this change is to be phased in over a period of years.

Rollback of Tax Expenditures

Tax expenditures assess the costs, in terms of forgone revenue, of various tax provisions that provide tax breaks for certain taxpayers and activities. Over the last few years, the Government has put into place a number of tax expenditures. Some have been as a result of Government looking to assist business during the recession. Others were put in place to meet certain social policy objectives.

The following are a number of tax expenditures which will be reviewed for the 2012-2013 budget.

Hotels & Restaurants

In 2009, the Government put in place a Memorandum of Understanding for the hotel sector for payroll tax relief. In 2010, payroll tax relief was extended to the restaurant sector. This MOU has provided a reduced rate of payroll tax for these industries. Over the duration of this concession, the Government has in effect spent $20.4 million dollars on these tax expenditures. These concessions were never meant to be permanent and the Government will look to reduce them over the near term.

Pensioner’s Land Tax Exemption

In 2005 the Government exempted all pensioners from Land Tax. Prior to this change, homes owned by pensioners with an ARV of less than $40,000 were exempt from land tax. It is not envisioned that the Government would look to remove this exemption in its entirety; however, the Government will examine ways to continue to provide this relief to a vast majority of pensioners while reducing this annual tax expenditure of $6 million.

Senior Vehicle Licence

In 2007, the Government put into place a policy whereby seniors who owned a vehicle did not have to pay to licence their vehicle. This blanket tax expenditure, while popular, has been very open to abuse. Since this exemption came into force there has been a 26% increase in vehicles licensed to seniors and a 358% increase in class H vehicles owned by those 65 and above. This tax expenditure has cost the Government $17 million since its inception. The Government will examine this tax expenditure with a view to putting into place a provision that assists seniors in need and is less open to abuse.

Land Taxes

The Government is considering implementing a recommendation from the 1999 Report of the Bermuda Tax System to tax vacant land. There are pros and cons to this recommendation. Such a tax, if implemented, would provide more revenue to the Consolidated Fund, which can be used to fund national priorities. However, taxing vacant land could also spur owners to develop vacant land which while increasing economic activity would reduce undeveloped land. There is also the question as to whether all vacant land, or only vacant land zoned residential should be taxable.

Creating a Local Debt Market

Although the Government continually enjoys excellent access to international markets, the Government is considering financing most of its future borrowing requirements locally, in Bermuda dollars. It is anticipated that this choice would lead to more economic activity on the island, and may spur local capital markets. When these financial instruments are issued, they will provide the ability for savers to diversify their Bermuda dollar holdings and will offer another option for savers which may provide attractive saving rates.

The Government emphasises that the policy options listed above are for discussion purposes and that no decisions on any of the above for the 2012-13 budget have been made. During the month of January, the Government will hold public meetings on the above policy options to encourage public debate and discussion on the priorities for the 2012-2013 budget. The Government welcomes feedback on this report as we look to involve as many as possible in the Open Budget Process.

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  1. Mad Dawg says:

    So. First and foremost is the “harmonisation” of import taxes.

    Not only was the 35% permanent, but the plan was to make everything 35%.

    That’s what we get for trusting a wasteful government with tax money. Higher taxes.

    And this is befor ethe election. If they win, we won’t know what hit us. Every last penny will be taxed.

    • walls says:

      At that point government would be waging war with its own people.

      • Yup says:

        The best Option is for the people of Bermuda to vote for change and bring in a new govt that will put Bermuda back on track!!

      • Triangle Drifter says:

        And you think the PLP has not been waging war against Bermuda already?

        The financial raping & pilaging has been going on for some time now.

    • My two cents says:

      Things are going to get ugly in 2012 as government is forced to raise revenue and call an election. Prepare to be a prisoner in your own home.

    • MinorMatters says:

      People, you don’t have to wait until an election to voice your displeasure. By now you should be acquainted with the word: OCCUPY.

      In my own words: Great Disatisfaction brings about the Greatest Change.

  2. Family Man says:

    Nowhere do they talk about reducing the size of the party favours. It’s all about which of you lot are going to pay for the on-going party time and how much you’ll have to pay.

    Yippee…bring on Beyonce!

    Brought to you by the Party Loving People.

  3. The Gambler says:

    I would increase the betting tax put that right alongside the Sin tax I cant see why it needs to be decreased

    • Family Man says:

      It needs to be decreased so that a certain ex-premier can put in place his long stalled internet gambling operation.

      Might as well sully what little remains of Bermuda’s tattered reputation.

  4. sandgrownan says:

    It’s still tinkering. It doesn’t change any of the fundamentals. She picking around the edges and has no clue how generate an influx of capital and liquidity. Jesus these gusy are stupid, and somebody needs take Burch and shake him until his ears bleed for the damage he did.

  5. MinorMatters says:

    I would like to see more Work being done by “Works and Engineering”. So tired of these capital projects being spread over years which could be done in a matter of days if “workers” could be seen applying themselves as opposed to always standing around in effect loitering, doing nothing while they get paid with tax payers money. How about either making some redundancies or demanding more efficiency and of course, ensure LESS Waste. Cut out overtime, pay per unit of work. Ms Paula needs to do her work from within before grabbing my hard earned money.

  6. MinorMatters says:

    Land Tax on VACANT Land…how desperate and damn despicable, not to mention GREEDY.

    • Triangle Drifter says:

      Tax something that earns nothing & is not in use. Only the PLP could come up with such stupidity & desperation.

  7. Datbye says:

    Ok First of all see how nasty they are, dont be surprised if you see gambling legalized next year cause they want to reduce the taxe on that. Sec. why isn’t gambling never been part of the sin tax. This alone is crazy. Third damn they havent hiot us hard eneough with putting the airport tax at 35%, now they want to do something similar to this for the Personal Imports, WTF im really getting fed up with these stupid A_s, iss Poor So call Governing. How we are to live comfortable. Keep it PLP see if you get in for your next term.

    Have a one all.

  8. JT says:

    This will only be the start of a massively increased tax burden.

  9. Render unto Caesar says:

    Perhaps it time Churches start paying land taxes.

    • JT says:

      Why shouldn’t they?

    • Truth (Original) says:

      I am not against that but you are going the wrong way with this. Before you look externally to other sources of revenue, the Govt needs to look internally to recoup the waste and trim the fat. AFTER that process is done, see what remains to be filled and then look at what taxes should be increased. The current approach is to accept wasteful spending and the looking for more money from you.

    • PEPPER says:

      I have always thought the churches should pay land tax.

    • O I C says:

      I bet if u taxed the churches this recession would be over imediately! Lol

  10. Truth (Original) says:

    I didn’t see any provision in there to claw back the millions and milions of dollars wasted on these shady capital projects. That would be a great place to start looking for cash as opposed to further taxing people who are already suffering.

    It was very telling that when Derek Burgess was “promoted” to Deputy Premier the Premier took the Capital Projects out of the Works and Engineering portfolio that he holds. I wouldn’t be out of line to think that there were questionable things happening in that portfolio and she wanted to have better control over those expenditures. uUfortunately, it was too little too late as the damage had been done.

    Now the PLP is in “find some cash” mode and I hope that PLP supporters can see this for what it is. They spent/wasted too much money and now they need some cash. You can’t blame that on the recession. This is a homegrown issue of mismanagement, plain and simple.

    It is extremely frustrating.

  11. pebblebeach says:

    Can we just call it what it is….the beginning of the “The Bermuda Austerity Package” and stop with the Cog-wash….can’t wait to hear about the cuts in Government services…the beneficiaries of the wasteful spending over the past decade or so must be smiling all the way to the bank…

    • ap says:

      cuts to govt services will not happen, at least not until a last minute dash when all of these other ideas fail. she is obv grasping at straws and discussing and considering unreasonable ‘revenue streams’ as she calls them. just look at the idea of a local debt market… with the record of the past 14 years of PLP rule, who in their right mind would buy up bonds issued by them?

      CALL AN ELECTION PAULA!!!!!

      • You can't be serious says:

        Of course, are you that dumb? No one is going to buy AA rated debt.

        You are clearly off base my friend, I hope when the election is called your don’t weep too hard at the result.

        • Mad Dawg says:

          We have a run rate of minus $260m yearly. In 4 years, that’s another $1.1bn or so. Do you seriously think this can go on forever? It’s already out of control as we speak. She has no idea how to cope with the debt burden we have now, with the revenue trends we have. What happens when the debt is twice what it is now?

          Do you really think the AA rating is safe forever? Would it really be a big surprise if Bermuda was put on negative watch followed by downgrades?

          and at the election if the sheeple vote the wrong way again, they will get what they deserve. I’m already thinking that winning the next election will be a poisened chalice.

    • Ride says:

      This has nothing to do with austerity.

      “In economics, austerity is a policy of deficit-cutting, lower spending, and a reduction in the amount of benefits and public services provided.[1] Austerity policies are often used by governments to reduce their deficit spending[2] while sometimes coupled with increases in taxes to pay back creditors to reduce debt.”
      http://en.wikipedia.org/wiki/Austerity

      There is no attempt to cut the deficit, reduce benefits, reduce deficit spending, or reduce debt. This is only lowering spending (by cutting support of social services) and increases taxes.

      Over 47% of the government’s spending is on employee cost (http://bermudasun.bm/main.asp?SectionID=24&SubSectionID=270&ArticleID=55746&TM=48106.02) and yet no real cuts in this chunk of expenditure have been made. The MPs themselves have not taken a cut and the majority of these employees (the BPSU) received a 1.25% increase earlier this year that increases this cost. Instead Government slashes Education, Police, funding of social services. The things that we need most in times of hardship. Then the few places where we can stretch our limited dollars are heavily taxed because local retailers want to gouge us at the register.

      It’s disgraceful.

  12. Towhereas says:

    Considering the government is fast approaching the debt ceiling and running a deficit (which I expect will increase vs guidance over the next 6 months), a debate on whether current “fiscal rules are correctly specified” will take center stage, methinks. The PLP will argue the public debt cap should be measured on a realtive basis to GDP as opposed an absolute $ basis. This would obviously give them significant scope to further lever up. Bda’s debt/GDP ratio is very low currently, though this is purely down to conservative fiscal management in the past. With the numerator (debt)growing and the denominator (GDP)contracting, this ratio will continue to rise. I agree that a relative approach is generally the better measurement, HOWEVER given the Bda economy’s reliance on tourism and especially intl business (whose LT presence is less than certain), giving the government further scope to issue debt could be very dangerous. Just some food for thought…

  13. JB says:

    So the PLP is going to make the pensioners pay for all the overspending of the Ewart Brown administration (including Paula Cog in the Wheel Cox). Give the retirees something and take it away. Punish people on fixed incomes and no jobs. What are they thinking? My opinion cut MP salaries by 15%. Stop government buying all these fancy vehicles. Why do they need a giant pickup truck as a work vehicle. There is hardly any room in the bed and the fuel bill must be ridiculous. That is just one example. Government needs to think harder about budget cuts, how about reduced work weeks, less vacation and sick time (I mean who needs five weeks sick leave a year).
    Increase those sin taxes by all means hopefully it will reduce the burden on the health system. How about give some incentives to the developers of the hotels. Dr Brown said they would all start construction last year, but maybe they need some duty exemption for the first 6 months of construction or payroll tax relief for the first six months. Let’s allow casinos it seems the PLP are planning to reduce the tax so maybe they are headed that way. Casinos will work to increase the tourism arrivals and also increase government revenues instantly. Tax the equipment imported to setup a casino and tax the winnings.
    Do we have to think for the PLP. Taxing your seniors will not get you votes from them or their children who will end up financing their tax bill.

  14. navin johnson says:

    and yet another in a long line of stunning failures and take backs by this good for nothing government…free tuition? oops take it back….free day care? ooops take it back….free license for seniors? ooppps take it back….free property tax for seniors? oops take it back…..they are incapable of writing legislation…period …end of story…..probably still get voted back in….

    • PEPPER says:

      But the ministers will not take a pay cut !!!what sort of pension does the former premier get ?

  15. JT says:

    Look at our debt on a per capita basis and compare to other countries- NOT GOOD. Consider our ability to reduce the debt based on our undiversied economic options – NOT GOOD. Make SIGNIFICANT reductions to government spending immediately.

  16. MinorMatters says:

    I have one word on my mind right now: OCCUPY.

    Time for some proper oversight. Get rid of that useless Governor too. Fish rots from the head and so we should do a cleanout from the top of the chain to the bottom.

    We the people deserve better.

  17. The Future says:

    It is amazing that despite all the reported developments around the world, people in Bermuda still haven’t gotten it. Governments are about themselves and not the people. They recognize how far their revenue source (you) is from them and splurge while you struggle. You say, yes but we will vote them out. Haven’t you noticed the players in the wings all have them same vices? You hope/vote for a future while they spend your money. They know you are impotent. Frustrated and impotent. They are helping you to get over your wasteful frustration and develop some real power. Voting is for chumps.

    • Truth (Original) says:

      …so what is your solution to bring about change?

      • The Future says:

        To be sure, stop gap measures are required but let’s not confuse this with a solution. It is mere spray paint on an already rusting bike. This isn’t the space to go into a full discussion but I would say, beyond stop gap measures, the community needs to cultivate a coherent culture of complete success (individual, family, corporate,community). Read into that what you will. At this point, politics is a distraction from what we should be DOING on a day to day basis. With a coherent (moral) community in place, a decent economic situation in place, politics would be a viable extension of those. Who wants to be immersed in an economic and political scene with an abundance of immoral people? The results so far speak for themselves.

        • Truth (Original) says:

          I agree with you about our moral collapse. However, voting is part and parcel of having a functional society. What we see today is many of our young people abdicating their voice to those in the house and then get frustrated when their needs aren’t being met.

          With respect to dealing with the collapse of our morals, God is the answer, plain and simple. Those who push back on that Truth, either offer nothing meaningful in exchange or they offer godly advice by a different name.

          He will be glorified nonetheless.

      • Mad Dawg says:

        Hey ‘Truth’, here’s a solution. Let’s buy a few Beamers and Audi’s, top of the line, go one a few shopping trips, hire some expensive consultants to do the actual work, give some planning favours to our mates, and Paaaartay!

        That’s what they’re doing still, isn’t it?

  18. What about this says:

    can the rich 10% pay more taxes???? and the 90 % pay less

    on Car Insurance, duty, Health care!!

    Just saying…

  19. drunkenUrsula says:

    Paula get rid of that useless Finance Minister…….call the election please…its the time of year to give….

  20. Discounted Courses says:

    The Hon. Paula should enroll for a discounted course at Bermuda College on finance. Looks as if she needs it and while she is there enrol in Craig Simmons’s ECO 1101 course.

  21. MinorMatters says:

    Ms. Paula you are clearly out of your depth. Plain and simple. It is okay to consult with some of the CEO’s of IB who have experience with numbers of this magnitude. Have you reached out or are you too embarrassed, too arrogant or just plain clueless…?

  22. navin johnson says:

    she does not have to go to CEO’s of better yet CFO’s she can go to Bob Richards and Grant Gibbons for help….I mean if she really cared about Bermuda and its people right? or just the party? right …just the party…

    • MinorMatters says:

      naww…that would be the sensible thing to do. Ms Paula would do well to surround herself with local experts with credentials and with proven expertise with those individuals you named.

  23. Senior says:

    Ms.Paula, If BullSh*t was music you would be a Brass Band.
    You are going to RAPE the seniors again by taking away from us what was given to us (free car Licence) my, my, my. whilst your at it take back everything from us.

    Oh My! When will you get tired of RAPING us to JUSTIFY what you have done to this Island it is not the Seniors fault IT IS YOURS.
    If you know for a fact who these Seniors are who are licencing these class H cars surely they can be questioned, by the way give credit where credit is due:-
    AT LEAST WE CAN DRIVE AND DO NOT HAVE TO BE CHAUFFERED EVERY WHERE WE GO IN A $58,000.00 car last car dealer I checked said you can purchase 2 for the price of the one you are driven around in:-

    I am jus saying.DO NOT BITE THE HAND THAT FEEDS YOU. LEAVE THE SENIORS THE HELL ALONE.

    Take a cut in your pay along with your ministers!!!!!!!!!!!!.

    YOU DUG THE HOLE NOW YOU WANT TO RAPE THE WHOLE OF BERMUDA TO FIX THE GOVERNMENTS BANK ACCOUNT: Rubbing Peter to pay Paul:;;;;;;;

    GIVE ME A BREAK Ms.Cox

  24. Second says:

    You can’t keep squeezing the same orange all the time, after a while the juice dries up. Be for real!! Start looking at some of those salaries our govt. ministers are making and do a ‘little’ squeeze there. You might be surprised how much juice you come up with. Feel like a dog chasing his tail?

  25. Senior says:

    Ms.Cox: “Transparency” You are as transparent as they come, forgot to say do you and your ministers pay to insure and licence those LARGE cars ($58,000) you all drive around in no, we the Bermudian Tax Payer pay for them SENIORS included:

    Maybe, if you all start paying to Insure and Licence them out of your Huge pay checks that will assist you with the MESS you have made as a Finance Minister.

    Oh no you can’t do that because that is one of the Perks that comes with the job,
    why don’t you do away with cars and authorize purchase of bikes that way the ministers cannot use them for Grocery shopping, etc.

    Signed:
    Mad As Hell Senior Who Drives a Class “A” Car

  26. wiaruz says:

    ” the Government is considering financing most of its future borrowing requirements locally”,

    This is because they have completely tapped out the international investor. A downgrade would be the death knell. The government now wants you to lend them money to finance the hole they have created. This will drain money from the banks and reduce their ability to lend.

  27. David says:

    Most of the civil service is on a 32hr work week – we’d save money if they all worked longer for the same pay. Maybe this is one of the untouchables though!

  28. Triangle Drifter says:

    6 years ago who would have dreamed that Bermuda would be in the financial nightmare that it is in now in 2011? The really frightening thing is that those who voted this nighmare into Government are still asleep, though it appears that some are finally waking up to the nasty reality they created by voting PLP.

    Tourism is all but dead. IB has been offended away. Smart Bermuda money has been quietly leaving for a long time. The brain drain is on. Real estate is down. People are upside down in their mortgages. Unemployment has never been so high in living memory.

    The PLP are at war with the very people who voted them in multiple times, the seniors, the fixed income, those who used to have hotel jobs, the so called working class. BTW EVERYONE works.

    Bermuda, got what you voted for. You got what you deserved.

    Want more licks? Vote for a new kind of slavery. Financial. Vote PLP.