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Bermuda's Budget Plans Challenged

by Mike Godfrey, Lowtax.net, Washington
24 February, 2015

Bermuda's Public Services Union has called on the Government to shield employees in the hotel, restaurant, and retail sectors from plans to revoke payroll tax concessions, as announced in the 2015/16 Budget.

To plug a growing fiscal deficit that has been allowed to expand in recent years, Bermuda announced that it would hike payroll tax rates on employers and employees by 0.5 percent and 0.25 percent, respectively. The Government also announced that payroll tax concessions for the hospitality, restaurant, and retail sectors will be partially rolled back in 2014/15, with these sectors to face a rate of 5.5 percent.

The Union is concerned that this increased tax burden will be passed on to employees from April. Jason Hayward, the Union's President, said: "I will refrain from being overly critical on the specifics of the Minister of Finance's 2015/16 Budget as I don't envy the burden that has been placed on his shoulders. The combined reality of the poor economy and Government's poor financial position creates an environment in which any combination of revenue-generating or expenditure reduction ideas would have been met with an increased level of negative reaction."

"There are two elements of the Budget that I find disturbing. Employees in the hotel, restaurant, and retail sectors will have to absorb the full brunt of the roll back in payroll tax concessions. This will ultimately mean that employees will experience a reduction in salary of 5.5 percent starting April 2015, while their employers will pay no additional taxes."

He has called on the Government to ensure that employees do not shoulder the increased the tax burden, requesting that the Government instead compel employers to be responsible for a portion of the applicable 5.5 percent payroll tax rate.

Other measures announced in Bermuda's latest Budget included:

  • An increase to duty on fuel by five cents per liter in April;
  • A hike to the land tax on commercial properties from 4.4 percent to 5.5 percent;
  • An increase to the corporate services tax rate from six percent to seven percent; and
  • An increased Airport Departure Tax of USD50 per passenger, up from USD35.

The measures are seen as a first step towards establishing sustainable finances within three years. Bermuda has asked the International Monetary Fund to support efforts to develop plans for new revenue streams, which, based on the decisions of other international financial centers in recent years, could include the introduction of a value-added tax.


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