Budget Report: Tax Increases, Deficit & More
[Written by Don Burgess]
Tax increases are on the way at the pump, at the airport and in your paycheque as just three ways Government is seeking more money for the 2015-16 Budget.
Finance Minister Bob Richards said “in order to reduce the deficit, the Government considers it appropriate now to strengthen the tax base.”
Increases can be expected on Payroll Tax, Land Tax on commercial buildings, Corporate Service Taxes, Customs Duty on fuel, Airport Departure Tax and other fees as part of Government’s Two Track Strategy.
Mr. Richards said Government expects to collect $931.3M in 2014-15 compared to the revised estimate of $875.9M for this financial year due to the increased taxes and fees.
The Finance Minister added Government expects to spend $1.151B leaving an estimated deficit of $220M.
Payroll tax will increase to 14.5% from 14% with both employer and employee evenly splitting the cost of the increase.
Airport departure tax will rise from $35 to $50 and gasoline will go up by five cents a litre.
Deloitte Bermuda’s 2015 Budget Infographic is below; click to enlarge [PDF here]
In addition, the land tax rates for commercial properties will go from 4.4% to 5.5% and a rise in the Corporate Tax rate is estimated to give Government an additional $1.
Payroll concessions for the hospitality, retail and restaurant sectors will be partially rolled back. Businesses in these sectors will pay a rate of 5.5%.
Government is also extending the early retirement eligibility plan to employees aged 55 as ways to help reduce the civil service.
Other cost cutting measures such as consolidating schools, reducing the cap on Financial Assistance, cutting the travel budget, and suspending the Agricultural Exhibition for a year had previously been announced.
Minister Richards believes the economy “is bearing fruit” by pointing to an increase in retail sales, new company formations, investor interest and the America’s Cup.
He said “these signs bode well for the future, but there is a long way to go before we get to solid ground.”
The other part of Government’s Two Track Strategy is stimulus through direct investment. He projects a total of $930M will happen in Bermuda over the next 3.5 years through eight major projects: St Regis [$140M], Ritz Reserve [Morgan’s Point, $160M], Fairmont Hamilton Princess [$40M], Sinky Bay Beach [$5M], Pink Beach [$30M], Ariel Sands [$50M], Airport [$255M] and America’s Cup [$250M].
He said these projects “are indeed for real” and will happen.
Government spending on the America’s Cup is broken down into three areas: $37M on infrastructure and services; $15M in sponsorship and a $25M sponsorship guarantee.
PwC’s 2015 Budget Infographic is below; click to enlarge [PDF here]
While that total adds to $77M, it does not mean Government will spend that much. He said the “sponsorship guarantee is not money spent by the government, but rather an underwriting of private sponsors. That underwriting will be reduced as additional commercial sponsorships facilitated by Bermuda come on line and by a proportion of admissions revenues earned up until August 2017.
“The claim that the America’s Cup will cost the Bermuda government $77 million is false. That statement assumes that the America’s Cup in Bermuda will be an abysmal failure with no sponsors. That type of thinking only guarantees failure as an outcome.”
Just like he did in last year’s Budget Speech, Minister Richards spoke out against the banks.
Loans to residents declined last year and reports indicate that employment in the sector has been furthered reduced by more than 200 positions.
“Government is studying various options to restructure the banking sector and it continues to be in discussion with the banks about these and other relevant issues,” Mr Richards said.
He added many tough decisions remain as the road to recovery is still ahead of us.
The Finance Minister pointed to the mountain of debt Bermuda has — the service costs the 2015-16 financial year are $170M [up from $161M], which would make it Government’s second largest department if it was one. He projects the public debt will be $2.31B on March 31, 2016.
Minister Richards concluded by saying: “The stage has been set for the next three years… now we just have to execute, as a unit: every person doing his or her part to return Bermuda to a position of economic stability, sustainability, opportunity and prosperity.”
He said finding our way to a balanced budget and where those who want to have a job can find one “will require sacrifices across a wide spectrum of Bermuda residents, but it also underscores a promise that our sacrifice has a specific purpose and will not be in vain. A better tomorrow is what we seek and a better tomorrow is what we shall achieve”.
View all our coverage of the 2015 Budget here and our live blog covering the Budget here.
No layoffs – more creative tax.
Junkfood/sugar tax
Cut rental subsidies – let rents find their own level
Higher fuel tax
Increase/double cell phone tax
Much rather pay more tax and have work, then to see people without work.
Ah, I didnt hear him mention about the CEO of the BTA making $1,000 a DAY !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Can you please stop with this and try and have a civil conversation. Why aren’t you ranting about what Chris Furbert makes or does that not fit your narrow political agenda.
“Why aren’t you ranting about what Chris Furbert makes ”
Simple, the BIU members elect their president and pay his salary. The tax payers do not pay the BIU president’s salary.
Currently, the BTA is a tax payer funded entity, thus the tax payers are paying the CEO’s salary.
There is a big difference here.
Because Chris Furbert is continuing a Legacy that my Father and Grandfather helped to build so I and my children and grandchildren can benefit in a healthy working environment instead of being subjected to substandard treatment like our cheap labor guest who are here.
BULLCRAP!
And without people like the CEO of the BTA there would be no jobs for your children and grandchildren unless you plan on opening up a sweatshop factory anytime soon. Bermuda requires money coming in, we produce nothing so paying a highly qualified professional a competitive salary is just a drop in the ocean compare to the economic benefits that can be reaped through a well thought out tourism revival strategy. Already we are seeing more hotel and investment activity alongside the winning bid for the America’s cup. Which was highly steered by senior execs of the BTA.
Now look at this way, money comes into the Island mainly in the form of US Dollars (foreign investment), this is then distributed throughout the economy which allows the average worker to earn a living. The bulk of the Unionized workforce is placed within the Civil service at a blue collar level. So The government relies on taxes and borrowed money to pay members of the civil service, this money comes essentially from foreign investment which is again attributed to the CEO’s of private organizations who generate incoming $ in the form of financial services or tourism in Bermuda.
So to simplify that for you. The CEO of BTA creates jobs and economic activity by actively encouraging investment whilst the average union member consumes the benefits of that in the form of every day wages.
So who is more essential, the Union worker who does nothing but consume or the CEO of a company who generates economic activity? Figure it out!
That CEO is worth it…he is educated and talented. unlike the majority of you people who can barely write your own names. Pay him that and let the jealous people cry
“unlike the majority of you people who can barely write your own names” ?? I had to type that over to make sure I read that right.. smdh. You are painting that wall with a mighty big brush, mind you don’t spill the paint.. #sothatswhatyouthinkofus, #anotherdayinparadise,
Oh that was insensitive. Even though it applys to many you are supposed to write it in a politically corect way so that delicate feelings will not be hurt.
The truth is a tough thing to face sometimes.
You sound uneducated and racist….
“Tax increases are on the way at the pump, at the airport and in your paycheque”
The W&E road crew sitting by the side of the road who wave to you on your way to work in the morning thank you.
The post office workers chatting with their friends as you drive by thank you.
The ferry workers and bus drivers marching from their “meetings” thank you.
Your taxes pay their pensions but you won’t be able to retire for many years yet.
Don’t forget to thank the CEO of THE B.T.A who makes $1,000 a day.
Absolute outrage!
We’re probably paying about $825/day more than we have to!
$35k a year would’ve been more than competitive. More than enough of a salary to ensure that we were able to attract someone with the necessary experience and knowledge.
Civil service sick days cost Bermuda more than $15m a year! We should thank the hoookie playing Unionized civil service before we thank the CEO of the BTA.
well I do think the worse is yet to come…after the ministers get their allocations and mandates I do feel we may see some job losses….I REALLY HOPE THIS WONT BE THE CASE but Mr Richards did say “We cannot guarantee that the planned reduction in spending can be achieved without layoffs of workers in the public sector for the coming fiscal year.” I think that was his nice way of saying job losses are come … LETS KEEP OUR FINGERS CROSSED !
Where is the outrage ? Where is the chasing of IB out of Bermuda by raising income tax ? Come on , did Bob Under The Hood consult with ABIC/ABIR , C OF C and the rest of the Alphabet groups ? I ask once again , where is the outrage ?
Let’s see the vigor in which this previously unpopular tax increase is defended !
I really think our path to destruction has been confirmed with the raising of taxes!!! The OBA has proven that they also for political reasons do no have the cahonies to do what really should have been done, and that is, CUT the CS and ALL wasteful spending!!! The OBA has folded to the unions and it will now be the major cause of our demise!!! I don’t think for one second there will be any CS layoffs until the day comes that the government, “who ever that is” CAN’T borrow anymore money, therefore leaving no choice to lay off staff because there will be NO money to pay them!!! I hope I am proven wrong but I sincerly doubt it!!!
The government is owed over $85 million in unpaid taxes and court fines, Min Richards says, the their efforts to collect have “not borne fruit” Why not?? We have a bloated CS and we can’t find five of them to be put full time on collecting that money by any means it takes to get it?? I have paid all my taxes on time every time, why do I even bother?? Maybe I should just become delinquent, nothing seems to happen anyway!!!!
Unlike you and the rest of the empty vessels that support the plp no matter what carnage they are creating, I will never accept this raising taxes!!! IT is wrong wrong wrong!!!!
Half those fines are a result of writing unnecessary tickets to generate revenue witch has back fired on them.
Nonsense!!! The majority happens to be UNPAID taxes to the government!!! Secondly you sound li,e a disgruntled traffic ticket receiver from the police??? I have not received any tickets from them and I am on the road all day everyday, I have been impressed with their presents lately and yes I see them pulling over a lot of people and giving tickets which they should!! I actually had one pass me the other day at a high rate of speed only to go through radar the moment he got in front of me,a big laugh erupted from me at that same moment!!!
Hasnt Govt yet considered implementing a ‘no licence renewal until outstanding traffic fines are paid’ law?
Nope, and they need to now!!!
go drink some more Green Cool Aid
Increase on fuel duty that is already too high. We are getting railroaded and shafted to the nines. OMG!
Don’t you read the news? Oil prices have plummeted. The price of gas at the pumps is going nowhere but DOWN. That lowering of price will be offset by the tax somewhat but it is still likely to be cheaper at the pump. Belco are buying up future supply while the price is low for a change.
Crying about getting railroaded and shafted without any thought whatsoever. You must be a PLP supporter.
You can keep increasing and increasing Mr. Minister but there will be a limit when you break the people it will back fire on you.
PLP!!The island needs you right now. America’s Cup and a new airport is the only things on the OBA’s minds right now.
What? You want more Grand Atlantic style economics? The LAST thing we need is the PLP now.
Besides stuffing their own pockets, what is on the PLP’s minds right now?
The sound of treefrogs…more treefrogs… …more treefrogs… … …still more treefrogs.
pretty curious, this thread. Not a mention of sailing or the tradition of the event. How provincial and self serving a discussion. It’s what you get when the events proprietors also have nothing but monetary motives. I hope Bermuda survives this mockery. The sport of sailing deserves better.
I have talked to many people in management positions in different ministries and they all say the same thing. A few in government work really really hard to make up for the lack of work done by most others. I say go to each ministry and ask the hard workers who doesn’t really work and FIRE them or make them actually work.
Actually aceboy, gas prices are going up again. It was in the bbc & international news last week. Prices are no where near what they were a few summers ago but yup they’re going back up again.