Premier To Host Town Hall Tonight

Premier Paula Cox will host the first on a series of town hall meetings to discuss the upcoming National Budget at 7pm this evening [Jan.18] at the Dalton E. Tucker Primary School in Southampton.

The Premier will be joined by Attorney General and Minister of Justice Kim Wilson, Minister of Health Zane Desilva, and Minister of Youth, Families, and Sports Glenn Blakeney.

Premier Cox released the Pre-Budget Report last month, which highlights a number of policy options currently under consideration and the town hall meetings ate designed to solicit public feedback on the document.

The section about possible policy changes from the Pre-Budget Report is 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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