Government Releases 2020/21 Pre-Budget Report

January 28, 2020

In advance of next month’s budget, the Government has released a 2020/21 ‘Pre-Budget Report,’ saying they invite and welcome feedback from the public.

A Government spokesperson said, “The Pre-Budget Report provides some insight into Government’s plans for the next fiscal year, which will be expanded in the annual Budget Statement which the Minister of Finance the Hon. Curtis L. Dickinson JP, MP will deliver to the House of Assembly on 21 February.

“The Government invites and welcomes feedback on this document. In addition to electronic communication, the Government will hold a public meeting and a series of meetings with key stakeholders in the coming weeks to discuss the principles laid out in this document and to solicit public feedback.

“The Government wants to hear from you. So please take a few minutes to read the Pre-budget Report and let us know what you think! Comments can be emailed to:”

Section on ‘Policy Options Under Consideration for 2020/21 Budget’ extracted from the document:

The following are considerations for inclusion in next year’s budget. One of the main objectives of a pre-Budget statement 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.

Payroll Tax

Reduce the Lower Band of Payroll Tax.

In line with the spirit of the recommendations from the Tax Reform Commission, the Government is considering reducing or eliminating the lowest band of Payroll Tax to provide relief to those workers that have suffered through wage stagnation and increases in the cost of living. If the Government reduces or eliminates the lowest band, it will adjust the higher employee bands in order to maintain revenue neutrality for Government.

Assessing the Deductible on Dividends Paid to Shareholders

In 2018 the Payroll Tax Act was amended to repeal the concept of notionals, and effective 1 April 2018, deemed employees and self-employed persons were subject to payroll tax on their actual remuneration, which includes dividends or any other form of profit distribution. The amendment also provided for the introduction of a $10,000 deductible on dividends paid to each shareholder. The Government will assess the cost of increasing the deductible from the $10,000 limit.

Incentive for Job Creation

In the upcoming budget the Government will consider extending payroll tax relief for the creation of new jobs in Bermuda to all sectors. This programme will provide a two-year employer payroll tax concession for additional jobs created in Bermuda.

Payroll Taxes for Small and Medium Size Businesses

Currently Employers pay at a rate of 1.75% when their taxable remuneration is under $200,000. Once it goes over the threshold of $200,000, the rate jumps to 7.00%. The Tax Reform Commission proposed that there should be rates in between. This would allow small and medium size businesses to expand their employee base, but the increase in the tax rate would not be so punitive. In line with the recommendation, the following is being considered:

  • Create a new payroll band between $200,000 and $350,000 at a tax rate of 3.5% to assist small business growth.
  • Create a band between $350,000 and $500,000 at a tax rate of 6.75% to encourage business growth.

Payroll Taxes for Public Service Vehicles

In the 2017/18 Budget the Government implemented a proposal from the Bermuda Taxi Owners Association for an amendment to the Payroll Tax Rates Act 1995. This proposal involved a one-time payroll tax payment per taxi to be paid yearly at the Transport Control Department, in addition to the licensing fee, at or before the end of September.

It is proposed to expand the successful Taxi Industry Payroll Tax scheme to all persons with Public Service Vehicles. This will include Limousines, Airport Limousines, and Minibuses. Persons in these categories would therefore no longer be required to file quarterly Payroll Tax returns to the Office of the Tax Commissioner. This method would benefit permit owners because tax payment will become simpler and convenient. It is proposed to set a flat rate tax of between $1,000 – $1,500 per vehicle.

Biennial Fee Increase

By way of standing policy, Government reviews all fees on a regular basis to ensure that there is reasonable cost recovery for the provision of the various services offered by a range of Government Departments. The last biennial review of government fees was conducted in 2018 when fees were increased generally by 5%.

Cruise Ship Passenger Tax

On 1 May 2019, the Ministry of Tourism and Transport gave one year’s notice to all cruise lines that the estimated revenue from the large ship infrastructure tax was insufficient for the transport infrastructure needed to handle current and future increased passenger demand. Therefore, the Government made a policy decision to provide one year’s notice that the “Large Ship Infrastructure Tax” will be redefined and renamed the ‘Transport Infrastructure Tax’. Accordingly, the tax rate will be increased from $22.00 to $25.00 per passenger over the age of two. This will take effect 1 May 2020 for all cruise ships, regardless of size and passenger count, that berth in Dockyard between 1 April and 31 October

This measure is a direct result of the urgent need to improve Bermuda’s transportation infrastructure and plan the redevelopment of existing cruise ship piers in support of the growth in cruise ships and cruise passengers. Our cruise ship partners and our visitors deserve the best Bermuda can offer.

The revenue received from the infrastructure tax will be used to invest in new transport infrastructure over the next ten years.

Land Tax

The Land Valuation Department will conduct their quinquennial revaluation of land, after which a 2020 Draft Valuation List will be produced. The List will be published on 31 December 2020 and will come into effect for land tax purposes on 1 January 2021. Depending on the results of the Valuation there may be a need to adjust Land Tax rates in order to maintain revenue neutrality for Government.

International Company Fees

The Government is considering the Tax Reform Commission recommendation to increase the yield on international company fees by introducing additional bands.

Increase in Immigration Fees

The Government is considering the Tax Reform Commission recommendation to increase the yield from Immigration fees by increasing the for 3 – 5 year work permit fee.

Managed Service Tax

The Government is considering the Tax Reform Commission recommendation to levy a tax on professional services provided by non-Bermudian businesses to local and international companies.

The Government emphasises that the policy options listed above are for discussion purposes and that no decisions on any of the above for the 2020/21 budget have been made. During the month of February, the Government will hold public meetings on the above policy options to encourage public debate and discussion on the priorities for the 2020/21 budget. The Government welcomes feedback on this report, as we look to involve as many as possible in the Open Budgeting Process.

The full 2020/2021 Pre-budget Report follows below [PDF here]:

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Comments (25)

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  1. sandgrownan says:

    Here’s some feedback. You are re-arranging the deckchairs on the Titanic.

    • mixitup says:

      Of course you would absolutely love to see that scenario under this Govt wouldn’t you.. I read a very disciplined approach…considering the previous Gov’ts One Billion addition to the debt during their short tenure, with a $187 million dollar cherry on top in the form of Carolina bay..

      • Truthhertz says:

        I always find it amusing how you guys go on about the debt added on by the previous administration, but conveniently omit the fact that they inherited an annual $400mn deficit from the PLP in 2013. A $400mn deficit the previous administration more than halved in their ‘short tenure.’

        It is also amusing how you guys conveniently forget that the PLP signed a land swap agreement which put the taxpayer on the hook for the clean up of Morgans Point which was expected to be $100mn plus.

        But hey I understand completely how throughout history how the victors conveniently rewrite history.

        Carry on.

      • sandgrownan says:

        It really is about all Curtis can do at this point. There’s no new revenue of any significant quantity, capital (intellectual & financial) is leaving, and there’s no liquidity in the local economy. Go count empty store fronts in Hamilton. Disciplined, arguably, but it’s just staving off the inevitable and it’s all he can do. And as they try to squeeze more out of IB, they will kill the goose that lays the golden egg. And poof, all gone, it’s all over.

        Your comment about the $1B debt increase is so laughable that it doesn’t deserve a response. If you genuinely believe that that was the OBA’s fault, then you are very very stupid and ill informed.

        20 years of financial mismanagement and failure. This is the PLP’s fault, their legacy, they own it.

        • Onion_peels says:

          We could tax all the gold held in the Arbitrade vault in Victoria House. I hear there’s billions.

        • REAL TALK says:

          So the 185 mill+ the Bermudian tax payers have to pay with regards to a hotel was not the UBPoba fault?

          Until you get a better UBPoba leader to represent the good in the party and doesn’t fly on a private jet to receive $$$$$$$. Money that was suppose to HELP the OBA campaign but instead went in someones pocket stop talking crap.

          “The crisis deepened last week after Landow confirmed he and a group of other US businessmen had donated US$300,000 to assist the 2012 OBA election campaign, although Landow said cash was wired to a group called the Bermuda Political Action Club and not directly to the OBA”

          • sandgrownan says:

            If you want to revive the tired old “JetGate” meme, then you have to also (if you’re being honest) be prepared to discuss the original JetGate. Where Dr. Brown did fly on a private jet, owned by the company of his friend, and where taxpayer money was “up for grabs” in a no bid contract for tourism marketing.

            Are you capable of that level of honesty? I’ll wait.

            • saud says:

              “(if you’re being honest)”

              And that’s where every debate falls apart….the ‘people’ in charge are not honest.

          • sandgrownan says:

            From an earlier thread on the economy when some idiot brought up Jetgate, I posted the following:

            This is all a matter of public record, no liable or slander here.

            When Dr. Brown was Bermuda’s premier (2006 – 2010), he also took the cabinet position of tourism minister. During that period, Bermuda spent $41 million on tourism advertising.

            On Brown’s watch, the government signed Globalhue to handle the account from 2006-2011. Brown and Globalhue CEO Don Coleman are longtime friends. Coleman had given Brown a ride on his private jet. The contract was renewed without a competitive bid in 2009 and Globalhue overbilled Bermuda to the tune of $1.8m.

            During the Brown/Globalhue regime, tourism declined 35%.

    • Retro says:

      Well put . Smoke em if you got them.

    • bluenose says:

      Sadly, I feel you are absolutely correct.

  2. Damian says:

    Ok cool fleece everybody then mercy

  3. Vortex says:

    In Risks facing the economy’…

    Effects of an ageing population, declining workforce, underfunded public sector pension funds and escalating health-care costs. This remains a certainty, not just a risk, which will result in serious medium and longer-term pressures ….this is perhaps the single most serious long-term issue Bermuda faces and one that now needs to be addressed with some urgency.

    Later in ‘Policy options under consideration’…

    The Government is considering the Tax Reform Commission recommendation to increase the yield from Immigration fees by increasing the for 3 – 5 year work permit fee.

    I think the left hand needs to have a chat with the right hand.

    • Real Deal says:

      nope the left is talking to the right hand. both hands understand that it is better and more logical to find a ways to put money in the hands of the existing customers instead of using Immigration to find new customers to prolong the monopoly game

      • Bernard says:

        Well that logic goes against any economist advice, are you sure you understand this?

        The left and the right hand are definitely not talking.

  4. Ringmaster says:

    As usual, no mention of reducing costs, just “we need more money to pay for the ever expanding Government”.

    More revenue will not solve Bermuda’s problems. Less costs will.

  5. Question says:

    So they’re putting up taxes, and will pretend to be surprised that the economy shrinks, Bermuda’s competitiveness will reduce, and the population will be smaller.
    They really have no ideas at all about expanding the economy.
    Fintech is a colossal Burt failure. Roban is spending tax dollar attending space events, like he did in 2011. That will go nowhere. They have absolutely nothing to offer.

    • Joe Bloggs says:

      Read what Onion Juice keeps posting. This is not about offering anything, this is about reparations for 400 years of slavery!

      In Bermuda that would be from 1609 until 2009.

  6. Joe Bloggs says:

    “Currently Employers pay at a rate of 1.75% when their taxable remuneration is under $200,000.”

    BS! Employers pay 10.25%.

    Some employees (like taxi drivers and fishermen) pay 1.75%, but not many.

    “The Land Valuation Department will conduct their quinquennial revaluation of land, after which a 2020 Draft Valuation List will be produced. The List will be published on 31 December 2020 and will come into effect for land tax purposes on 1 January 2021.”

    Great! My home has lost half its value since 2010, so my land taxes will go down!

    “The Government is considering the Tax Reform Commission recommendation to increase the yield on international company fees by introducing additional bands.”

    And there goes the rest of our international business.

  7. bluenose says:

    Taxi’s Operators to pay $1,000 to $1,500 flat rate Payroll Tax per year! Am I understanding that correctly? The Tax should be way higher than that in order to incentivise them into actually going out and working the hours that they are obliged to.

    • question says:

      Bearing in mind what the rest of us pay they’re getting off light.

  8. Stinky D. says:

    I wonder if New Buses will be in the Budget
    Getting tired of waiting at the bus stop

    • Why? says:

      I Second that Motion. Where Have all my Tax Payments Gone?

  9. wahoo says:

    Is there any mention of selling off the fishing rights to our territorial waters?

  10. Port 2 Port says:

    Somerset police station is still closed since the hurricane got those police officers stuck in a box up dockyard too. These lot like closing a police station down dont they. Smh