Column: Mathias On Economy, Taxes & Policies

[Opinion column written by OBA Senator Justin Mathias]

The Premier was very bullish when he gave a [brief] statement on the state of the Government’s finances. With lots of foot stomping support from his MPs, he told the House of Assembly how capably he was handling the country’s finances.

First of all, it appears odd that the first quarter finances for 2018/19 were released ahead of the 2017/18 full year report, but it gets odder – when the Premier stated that ‘Bermuda is no different and successive governments have wrestled with deficits and the responsibility to deliver services on behalf of the people of Bermuda’, he conveniently overlooked a very pertinent fact: for 15 of the last 20 years, the PLP has been in power and during that time our debt has grown to $2.5bn, because of increased interest to service that debt.

The only wrestling that took place was between Ministers to see who could spend – or overspend – more! It is thanks to the PLP that the ‘Ministry of Debt’ now has the second largest budget of all the Ministries.

It was only the OBA Government that successfully wrestled with the budget deficit and debt repayments. It is too early in this Government’s tenure to proclaim any real success – as they have done nothing to stimulate the economy, they have just raised taxes, and as many of those taxes have not been fully in effect, their impact would not have shown on the first quarter numbers.

The Premier also said that “revenues collected for the first quarter ending June 2018 are $260.1 million; this is $5.7 million [2.2%] higher than in the quarter ending June 2017. The primary reasons for the increase in revenue are due an increase in Payroll Tax collections of approximately $9.2 million above 2017 collections, higher collections in Passenger Tax of $2.2 million above 2017 collections and higher Land Tax collections of $2.1 million above 2017 collections. These increases were offset by lower collections in Other Receipts of $6.3 million and Customs Duty of $2.9 million.”

Clearly these figures are not final – the amount due under the recent Payroll Tax amendment which introduced a tax on dividends, which was backdated to April 1, cannot have been taken into account. In addition, the E-tax system has been unavailable for some time and the deadline for filing e-tax returns for the first quarter was August 15.

So, if large amounts of taxes had not been collected but revenues were still up, it begs the question: why impose taxes that greatly affect small Bermudian businesses, but which do not impact exempted companies and well-off individuals who receive dividends from publicly traded companies? And why make the money owed under the Payroll Tax amendment backdated?

Vance Campbell clarified in Senate that the Government uses the cash basis accounting method for quarterly reporting, meaning that the revenue numbers that the Premier announced were collected for the period January 1 to March 31 [ie under an OBA Budget], not the taxable period from April 1 to July 30 that Premier insinuated. So as an CPA himself maybe Senator Campbell can educate the Premier on governmental revenue recognition and the difference between collecting and recognizing revenue in its proper quarter.

In addition, the Premier also stated “overall, total Government spending for the first quarter of fiscal 2018/19 was $3.8 million, or 1.3%, lower than the corresponding period in 2017/18”.

Great! But, again, if you are under budget, why did you need to impose extra taxes? You have some extra wriggle room so why have you continued to increase the burden on Mr and Mrs Bermuda. Surely a break on the health insurance increases, funding Social Insurance or reducing the increasing cost of living could have been done instead of trumpeting the successes of OBA government policies and initiatives.

And don’t forget that Government fees have increased by five percent across the board, there are increased government fees on cell phone services, new vacation rental fees and sin tax increases including the new Sugar Tax which will hit the average resident with increased prices at the checkout counter.

Mr and Mrs Bermuda – who are also paying more for an increase in health costs this Government has implemented – must be wondering where they will be hit next.

On tourism, the Premier said: “When we were in opposition, we pledged to invest more in tourism and we have done that. Bermuda is reaping the results of that investment and that is positive progress for our island.”

Bermuda is reaping the results of the OBA’s decision to take politics out of tourism and form the Bermuda Tourism Authority – a body often derided by the PLP when it was in Opposition and now in Government. Government has very little indeed to do with the successes of BTA, so it is the BTA and the OBA that have improved tourism, not this current Government.

It was also under the OBA that new hotels were built, and the world’s attention was turned to Bermuda during our hosting of the 35th America’s Cup. Bermuda continued to build upon those successes with the ITU World Triathlon event, even though the current administration is trying to take credit for it.

The Premier also said: “I can report that the total number of persons contributing to Social Insurance as at June 2018 was 33,909. This is 322 more than were contributing in June 2017. Yes Mr. Speaker the facts show that there are 322 more people working this year than there were last year. Mr. Speaker, the best news is that out of the increase of 322 jobs, 83% of those jobs were held by Bermudians, and only 17% of those jobs were held by non-Bermudians.”

I find this statement a little disingenuous because it does not tell us the net increase in jobs – the number of new jobs minus jobs lost. It also does not tell us in what sectors and at what levels these jobs were. Were they full or part-time jobs? He said in a recent interview that he had the numbers so I’m guessing he’s waiting for this Op-Ed to release them.

The OBA believes in creating opportunities for all – and will support measures that do that. However, this Government appears to be putting so much spin on things that it is difficult to separate fact from fiction. We, the Bermudian public, deserve hard, solid, facts.

One hard fact, however, is that it is recognised that Government policies – when it comes to the stimulation of the economy – lag, and the full effects take anywhere from nine months to two years to be reflected in the economy.

The Premier is still relishing and taking ownership of the economic successes of the OBA Government and time will show the brilliance of Burt.

- Justin Mathias

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