Feb 2016 Financial News

Bermuda to raise taxes as national debt grows

Feb 24, 2016

Finance Minister Bob Richards announced taxes are to rise in Bermuda as he unveiled a US$1-billion budget last Friday, triggering a sharp response from the opposition Progressive Labour Party (PLP) that some local companies would go out of business.

Richards said a new five per cent services sales tax to be introduced in 2017 would rake in US$50 million a year as Bermuda, which has emerged from six years of recession, battles to get to grips with a rising national debt.

He told the House of Assembly that cutting government spending had become increasingly difficult, and the approach must be revised "either by way of increased efficiencies, or through reforms in how services are delivered and departments structured.

"In order to broaden the tax base, a new services sales tax, the General Services Tax, will be levied on turnover from the provision of most services by service providers to the public," he said. "It is proposed that this GST will be levied at a rate of five per cent".

The GST would exclude banking, insurance and health care, as well as small service providers.

Defending the proposed new tax, the finance minister later told a news conference that the GST would "be levied on turnover from the provision of most services by service providers to the public".

He forecast the national debt - which stood at US$1.4 billion when the current administration took office in December 2012 - would rise to US$2.44 billion by the end of March next year. Unemployment in the British Overseas Territory is running at seven per cent.

THREATENING SOLVENCY

"Nobody likes tax increases, not the Ministry of Finance, not the rest of the government, not the business community, not the man in the street," said Richards. "Some of the measures outlined in this budget statement will not be popular. But debt service has become the second-largest 'ministry' in government ... it is threatening our solvency and, with that, our financial independence. So we must get to grips with the deficit and debt problem because they stand between us and a secure future," he added.

Bermuda's payroll tax will also rise to 15.5 per cent, with the employee share set at six per cent.

Government also signalled that most other tax-rate categories would also go up by one per cent as part of this fiscal year's financial blueprint for 2016-17, while additional taxes on petrol and fuel imports are expected to raise US$11.7 million a year, and duty on tobacco and alcohol are expected to bring in US$4 million.

In addition, a sell-off of surplus government property is expected to raise about US$3 million.

Reacting to the budget statement, shadow Finance Minister David Burt said a number of local businesses would end up hurting businesses and households.

"We are going to see some businesses that will go out of business because they cannot afford the tax burden," Burt said.

"We are going to see increased strain on families as all families will now be taking home less money in an environment where the cost of living is increasing. We have also seen the minister increase the price of gasolene in the country. These are things that are adversely affecting the people of this country."

- CMC

Source:
Jamaica Gleaner
Wednesday February 24, 2016

http://jamaica-gleaner.com/article/business/20160224/bermuda-raise-taxes-national-debt-grows