Minister Richards: Construction Payroll Tax Relief
[Updated] Finance Minister Bob Richards provided further details of the proposed payroll tax relief for the local construction industry announced in the Premier’s address earlier this month.
Speaking in the House of Assembly today [June 27], Minister Richards said, “The local construction industry has been particularly hard hit by the economic contraction of the last five years.
“At least 1,200 jobs have been lost. The proposed relief for the industry is intended to maintain existing business operations, promote job creation and attract much needed foreign investment..
“The relief we are proposing is similar to the new Bermudian hire payroll tax relief initiative that was introduced in the 2013/14 Budget. Initially this relief will be targeted towards the construction of specific projects of national importance that have been approved by the Economic Development Committee.
“The relief proposal is to create a special situation in which a construction employer carrying out direct construction work on the designated projects is not charged the standard payroll tax rate, but a concessionary rate of 5.25%.
“The payroll tax cost to the construction company will be zero if the employer decides to deduct the full recoverable rate of 5.25% from the employee as per normal.
“It is intended that the relief will apply to construction and all relevant construction activities and trades related to the designated project. Items such as plumbing, electrical, painting, welding, excavation, tiling, installation etc. would be covered.
“It is planned to implement the proposed relief by way of a payroll tax rebate programme,” added the Minister.
“The actual logistics of the payroll tax rebate programme is currently being worked through with the Construction Association and is anticipated to be fully operational by the October payroll tax filing period.”
The Minister’s full statement follows below:
Mr. Speaker, I rise today to provide Honourable Members and the general public with further details of the proposed relief for the local construction industry announced in the Premier’s address to the country on June 9th, 2014.
Mr. Speaker, the local construction industry has been particularly hard hit by the economic contraction of the last five years. At least 1,200 jobs have been lost. The proposed relief for the industry is intended to maintain existing business operations, promote job creation and attract much needed foreign investment..
Mr. Speaker, the construction industry makes a vital contribution to the competitiveness and prosperity of the economy and is often the object of much needed foreign investment. The relief we are proposing is similar to the new Bermudian hire payroll tax relief initiative that was introduced in the 2013/14 Budget. Initially this relief will be targeted towards the construction of specific projects of national importance that have been approved by the Economic Development Committee.
The proposed relief forms another part of Government’s plan and efforts to promote job creation in our economy, specifically Bermudian jobs. Its purpose is to reduce the marginal cost of hiring a construction employee without cutting the remuneration of that employee. It reduces the “overhead” that constructions employers have to pay for each construction worker thereby reducing the overall cost of a project to a potential developer.
Mr. Speaker, the relief proposal is to create a special situation in which a construction employer carrying out direct construction work on the designated projects is not charged the standard payroll tax rate, but a concessionary rate of 5.25%. The payroll tax cost to the construction company will be zero if the employer decides to deduct the full recoverable rate of 5.25% from the employee as per normal.
It is intended that the relief will apply to construction and all relevant construction activities and trades related to the designated project. Items such as plumbing, electrical, painting, welding, excavation, tiling, installation etc. would be covered.
Mr. Speaker, The Ministry of Finance has been in on-going discussion with the Bermuda Construction Association to determine the most efficient method to implement this relief. Following these discussions it is planned to implement the proposed relief by way of a payroll tax rebate programme. The actual logistics of the payroll tax rebate programme is currently being worked through with the Construction Association and is anticipated to be fully operational by the October payroll tax filing period.
Mr. Speaker, similar to the new Bermudian hire payroll tax relief initiative, an employer can only benefit from this concession if they are in good standing with regard to their payment of payroll tax.
Direct foreign investment is going to be one of the critical ways in which we dig ourselves out of this economic stagnation that has seen job losses and business closures during the last five years. We must attract foreign capital to our shores that will provide jobs not just in the construction industry, but all the other sectors that benefit from a growing workforce with more money to spend and invest in our local economy. The Bermuda Government can’t finance the projects and create jobs but we can provide a climate conducive to job creators to bring their capital, expertise and experience to get our economy moving again.
Thank you, Mr. Speaker
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Update 1.10pm: Independent MP Terry Lister said, “Today the Minister of Finance gave a Statement to the House on the targeted payroll tax relief for the construction sector. I support the intent of the measure as, if successful, it will help to stimulate the construction industry which is presently at a very low ebb.
“The Minister has stated that the initiative will be targeted towards the construction of specific projects of national importance that the Government’s Economic Development Committee has approved. This is good as it will help to achieve the national goals set to bring the country out of the doldrums that we are in.
“I have one principal complaint against the Minister’s approach in that “an employer can only benefit from this concession if they are in good standing with regard to their payment of payroll tax”. I strongly disagree with this approach as the programme is to operate on a rebate basis with the employer is expected to pay his tax at the end of the quarter and then receive a cheque back from the government for the rebate earned.
“If an employer who does quality work and would otherwise qualify for inclusion under this scheme is included when that employer submits his tax return at the end of the quarter the money that he would be entitled to receive as the rebate can be applied to the debt he owes the Government. This creates a win-win situation.
“If one considers that the employer was in this position of owing the Government for his back taxes largely due to lack of work, entering him into the programme is the best way of getting the back tax into the Government coffers!”
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You better stop taking money from your Govvenment workers in the name of a furlough day. Stop this smoke screen way of running the Country. Construction work is no booming business. You obviously have money to give away. If you truly want to and need to save money start with you and the Preimiers position. Why does a country 70,000 strong need to figure heads. The Preimiers job is irrelevant and is merely a smoke screen job. Get rid of it and the Premiers residence and the cost to secure that residence.
also get rid of the jr. ministers no need for them the back bench should be able to help the ministers with what ever help they need
and get rid of some government cars like why does the library need a kia soul da and make the police pay their own health insurance
Where were you the last 14 years when we were all taking it up the backside while they spent our $ and created debt that we will never be able to pay off? Or was that OK but now it’s a problem?
And de construction owners are laughing all de way to de Bank by paying their workers minimal wage(cheap foreign labor) and pathetic benefits.
A furlong day isn’t really taking it on the chin. Speak to people in the private industry and see what stories they have. According to you Bermuda doesn’t need a Premier so you can get your furlong day back? SMH. That was a kiss on the cheek compared to what needs to happen to make the size of our civil service sustainable. SMH
so you let the Construction have relief but take from the Pensioners,
that’s a smack in the mouth to the old folk that broke their backs to build Bermuda..
if that’s the best you can do…GET CRACKIN’ BOY!
funny how you can find the money to go to France which is extremely expensive to stay in their hotels and eat in their restaurants…
I wonder just how much that failed trip cost the Bermudian Public which could have been well used in Bermuda on far more urgent things!
Maybe Bermuda is not really all that broke and all of the complaints about being so is just a political ploy.
Ha,,that’s a good one, funny. If your being serious, please send me all your $ and I’ll invest it for you….promise
This is so wrong companies get the tax relief but the employees still have to pay. Why not have tax relief on only hired Bermudian employees this may give construction co’s the incentive to hire more locals. Everything this Govt is doing is nothing to benefit us people.
It is only for new bermudian hires. Areyou happy now?
Government social assistance for the better off in an area that is happy to lay off Bermudians and keep it’s non-Bermudian employees.