Full Document, Video & Highlights: 2018 Budget
Increasing access to capital for Bermudians by reforming the 60/40 rule to one that only requires 40% Bermudian ownership and adjusting payroll tax employee rate to provide tax reductions to those earning less than $96,000 were two of the initiatives unveiled as Premier and Minister of Finance David Burt delivered the 2018 Budget in the House of Assembly today.
A copy of the full Budget statement is below, you can view our live blog on the Budget here, all our coverage of the 2018 Budget here, and the full speech is below along with some extracts.
108-minute live video replay of the Budget courtesy of Govt television channel CITV:
60/40 Rule
We will increase access to capital for Bermudians by reforming the 60/40 rule to one that only requires 40% Bermudian ownership in order to operate in the domestic economy.
Revise Height Restrictions & Relax Condo Ownership Restrictions For Approved Developments
To increase the options for development inside the City of Hamilton and to provide economic activity to North Hamilton, the Government will revise height restrictions in the Hamilton Economic Empowerment Zone for residential and mixed-use development.
Revising height restrictions alone will not stimulate demand for property, which is needed to jumpstart the construction industry. Therefore, in addition to revising height restrictions, the Government will relax condominium ownership restrictions for approved developments in the Hamilton Economic Empowerment Zone, thus stimulating demand, generating wealth, and putting Bermudian construction workers back to work
Tech Incubator
We will have our first technology incubator space operational by July 2018
Blockchain And Digital Currencies
The growth of digital currencies is among the fastest-growing areas of global economic activity.
Bermuda will be well served by the economic growth and jobs that this emerging industry can bring to our economy. The Government is moving at a pace reflective of the urgency of the need, while prudently ensuring that this new sector is internationally respected for its sound regulation and adherence to the highest standards of compliance, for which Bermuda is known.
The Government, in conjunction with the Bermuda Monetary Authority, is currently developing legislation to govern Bermuda-based initial coin offerings and will, consistent with our vision, build a world-class regulatory framework for the oversight of digital asset exchanges and digital currency businesses in Bermuda
20% Of Capital Spending For Companies That Meet Empowerment Criteria
The Government announced a new Code of Practice for Project Management and Procurement, which states that the Government will “use its purchasing power to promote equality of opportunity with regard to disability, gender and race.”
In this current fiscal year, the Government will reserve 20% of capital spending for companies that meet the empowerment criteria under the new procurement policy. This Government will ensure that contracts are given to firms who have traditionally been unable to compete with the scale of larger companies.
Payroll Tax
To provide relief to those workers, the Government will adjust the payroll tax employee rate bands to provide tax reductions to those earning less than $96,000. The lowest employee band will be reduced from 4.75% to 4% resulting in a working couple earning $48,000 each, or a combined total of $96,000 annually, receiving an increase in their take-home pay of $720. Anyone making less than $96,000 will see a reduction in taxes; anyone earning more than $96,000 will not see any change in their payroll taxes. This reduction in taxes will reduce the Government’s payroll tax yield by approximately $5.1 million
Eliminate Employer Portion Of Payroll Tax For Any Disabled Employee
this Government recognises the challenges that persons with disability in Bermuda face, and as a society we have a long way to go in ensuring that they can enjoy a decent quality of life. To assist persons with disability in gaining access to employment and to reward those employers who have already hired disabled Bermudians, we will eliminate the employer portion of payroll tax for any disabled employee.
Sugar Tax
in line with the Ministry of Health’s consultation paper, it is proposed to introduce the sugar tax as an increase in the rate of duty on a defined group of items. The sugar tax will be finalised after the consultation period ends on 1 March 2018. To offset the expected increase in customs duty from the sugar tax, the Government will reduce or eliminate duty on healthy food items. Accordingly, duty will be reduced from 5% to 0% for eggs, potatoes, cauliflower, broccoli, carrots, turnips, oranges and apples. A portion of the revenues from the Sugar Tax will be earmarked for educational programmes to improve health outcomes.
Duty Relief For Sporting Clubs With Youth Programmes
Duty relief will be provided to sporting clubs that have youth programmes. This relief will include full duty relief on uniforms and equipment purchased and used by these clubs.
Commercial Rents
The Pre-Budget Report announced that the Government was considering taxing commercial rents. Following consultation, the Government will not introduce a new tax on commercial rents, but rather – as a temporary measure – it will increase land tax rates on commercial properties by 5% to yield an additional $15 million in land taxes. This temporary increase will generate additional revenue while the Tax Reform Commission looks at commercial rents and the income earned from 20 commercial properties whose income is not currently subject to taxation. Properties in the Economic Empowerment Zones will be exempt from this temporary increase.
Other Taxes And Fees
As an additional revenue measure, the Government will increase fees on cell phones and the Government authorisation fee of 2.5% imposed on the telecommunications industry. This is projected to yield $3.7 million in additional revenue.
Fees for most services provided to residents and businesses will be increased by 5%. This biennial fee increase is projected to yield $5–$6 million in additional revenue.
$1 Million More For BTA
The Bermuda Tourism Authority will receive an increase in funding of $1 million. The PLP has always held that we must increase the investment in our tourism marketing, and this Government will hold true to that promise. It is the Government’s view that the BTA can streamline its management to redirect more resources to the promotion of Bermuda overseas and the development of our local product. Through conditions attached to this year’s grant, the Government will ensure that a greater percentage of the $26 million given to the BTA is spent on marketing and product development, not salaries and bonuses.
$27.3 Million More For Health
The Ministry of Health will receive $190 million, an increase of $27.3 million. This increase reflects the Government’s appreciation for the fragility of some of our health services and the importance health plays in Bermuda’s society. We have restored the $25 million subsidy for hospital care for children, indigents and seniors, which was cut by the former Government to fund the America’s Cup.
Eight New Buses
Ministry has been allocated $3 million for the purchase of eight new buses.
Public Works Reduced $1M
Ministry of Public Works will receive an allocation of $74 million, a reduction of $1 million from last year’s allocation. Most of the savings will be achieved by moving government departments from private facilities, thus reducing the government’s rental expenditure.
$85 Million Borrowing
It is projected that during the current fiscal year the Government will draw $85 million on its loan facility, representing new borrowing. Therefore, on 31 March 2018, gross public debt will stand at $2.57 billion and net debt will stand at $2.42 billion. This amount is $50 million lower than the former Government’s forecasted net debt of $2.47 billion.
Budget Estimates
The highlights of the 2018/19 budget feature a modest 0.2% increase in total expenditure of $2.5 million from last year’s budgeted figure. Revenues are forecast to rise by 4.6% or $47.5 million and the current account balance, before debt service charges, is budgeted to be a surplus of $160.7 million.
No Raise In Debt Ceiling
As this is the last year in which we are expecting our net debt to increase, the Government will not be raising the country’s debt ceiling. Our debt ceiling is currently set at $2.5 billion and the Ministry of Finance will exercise prudent management of funds in this year, our final year of net borrowing, to ensure that we remain below the debt ceiling
The full Budget Speech is below [PDF here]:
