Chamber: ‘Business As Usual Budget’

Government is spending far more than taxpayers can afford to pay, the Bermuda Chamber of Commerce Economics Advisory Committee said today [Feb.24] following the release of the 2012/13 Budget.

Speaking on behalf of The Chamber, economist Peter Everson noted; “There were no unexpected surprises in this year’s budget, and as many suspected, it was little more than a ‘business as usual’ election budget.

“However, the absence of increases in general taxation has been well received by Chamber members.

“Our Restaurant, Hotel and Retail members are also pleased to note that their much needed Payroll Tax relief as been extended. Similarly, many retailers will be cautiously optimistic about the decision to harmonize taxation at a rate of 25%.

“In the view of the Economics Advisory Committee, this decision simply corrects a long-standing anomaly and brings Bermuda into line with internationally accepted tax practices.

“Many will also be encouraged by the Premier’s reference to promoting new ways of enhancing competitiveness to facilitate the establishment of new business by “cutting through red tape”.

“It is hoped that this policy decision translates not only into a streamlining of the process for international business but also the development of hotel properties in Bermuda.”

Mr. Everson went on to note: “The Chamber was particularly heartened by the announcement of the introduction of a public Bond Issue.

“This is something we have been very actively encouraging Government to consider since 2009. The Bond Issue will strengthen the investment sector and stimulate the Capital Markets, and provide much needed diversification in the investment industry.

The Chamber is “disappointed that there are no specific plans or programs proposed in this budget to arrest the shrinking economy.The economy will not stop shrinking by itself, Government assistance is required.

“The Government’s intention to take money from the Sinking Fund to pay interest, and borrow from the pension funds does nothing to change the reality that Government is spending far more than taxpayers can afford to pay.

“Equally concerning is the decision to allow private industry to voluntarily suspend employee and employer contributions to the Occupational Pension Act. While there may be those in the short term who see this as an opportunity to improve cash flow, the long-term ramifications can only be damaging, and employees under the age of forty should be very concerned.”

Mr. Everson pointed out that; “As of March 1st, 2011 the Government’s revenue deficit stood at $405 million, and included the $105 million shortfall in the Government Pension and Health plan.

“Even with borrowing from the sinking Fund and Pension plan, the Government will still be short $172 million in 2013, with no viable means of repayment. Added to which there will still be an additional $115 million short fall in the sinking Fund and Pension plan.”

In conclusion, Mr. Everson stated; “Government can only service its debt by reducing spending and increasing revenues and there are no signs of plans to do either in this budget.”

The broader Chamber membership will have an opportunity to weigh in on the budget during Monday’s annual Budget Breakfast; when Mr. Everson will join the Premier and Digicel CEO Wayne Caines on a panel, moderated by PwC Partner, Caroline Foulger. Subsequent releases are expected in due course from the various Chamber Divisions.

View all our coverage of the 2012/13 Budget here.

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