Build Bermuda first
Embracing a duty rise
February 14, 2011
Lately the retail community has been engaged in a silent tug-of-war with Mr Steven Thomson of Mailboxes Unlimited. Very cleverly, Mr Thomson, who owns a courier service and sells packing materials, is purporting himself to be just like the retailers as he brings in goods for customers. His argument is that retailers dont manufacturer anything and have to bring in goods as well. This is a gross exaggeration but nothing serves like self interest particularly when you are attempting to insure that your business model stays intact. His. Interestingly enough you will not find a single mention of his company being a retailer on his website. Nope, hes a consolidator.
Mr Thomson would be more like a retailer if say, he owned a business like The Complete Office or Gorhams, but alas he is not. Selling a few boxes and bubble wrap for the convenience of customers mailing things overseas is not exactly going out on a limb in the retail world. He is a consolidator of goods and provides an efficient method of delivery. In fact, since November, Mr Thomson has no doubt reaped greater financial benefits due to the increase of landed duty from 25 percent to 35 percent for goods brought in through the airport. He certainly did a number of advertorials representing that Bermudians could save money by using his services.
Sometimes its better to be lucky than good and this was very lucky indeed for Mr Thomson. At least I dont recall hearing any complaints from him that this duty increase would be horribly unfair to the average Bermudian. On the contrary, this was an unforeseen advantage for his business and I suspect, has worked very well for Mr Thomson. I doubt very seriously if you would hear Mr Thomsons voice in the chorus of protesters concerned about potential duty increase for personal importation if he didnt think it would affect his business. It will.
Mr Thomson, in todays Royal Gazette (February 13, 2012) is yet again attacking the retail community. Now he is representing that the shipping industry of Bermuda, under the mantle of the Bermuda Chamber of Commerce, opposes an increase of duty and that the result will be fewer consolidated shipments to Bermuda. First of all, there is no Shipping Division of the Chamber and if it ever existed the last meeting was probably held when Bermuda still had its railroad. No matter, the suggestion that there would be fewer consolidated deliveries is just an example of scaremongering.
I have news for spokesman Mr Thomson; unless he doesnt want to eat, the Oleander will be sailing from New Jersey every Friday with or without your sofa from Pottery Barn. Mr Toby Kempe of Bermuda Forwarders has assured me that he is not in support of Mr Thomson. His business relies on consolidated shipments from retailers and other small businesses. Your business is also important to him but his bread and butter comes from businesses like mine. If retailers go under his business will be reduced perhaps irreparably.
So what about this subject of potential increase to duty; is it fair? Well it might interest you to know that even among retailers there has been vigorous discussion as to what would be an equitable solution to this quandary. Many retailers are so fearful of any reprisal from you, the consumer, that they are afraid to speak out.
You might understand this response if you took a look at the recent online protest (www.change.org) against a potential duty hike for personal importation of goods. Everything from Im a womans size 2 and cant find anything to wear to I wear size 12 womens shoes and a long list of what one cant allegedly buy in Bermuda. I think I might speak for all women around the globe when I say that a woman who cant find a size 2 anything should stop her bragging.
But heres the rub. Every retailer understands that they cannot be all things to all people and that it will be impossible to carry everything in their store. We understand that sometimes time is a factor and that your busy life necessitates purchases made on the internet or while you are travelling. We also understand that it is our problem as business people to figure out ways to entice you to shop in our shops and give you good value for your hard earned money. It is also not your problem that we pay exorbitant inland freight overseas, ocean freight to Bermuda, wharfage fees, local delivery fees, and yes, that dirty word again, duty. Ill leave out the rent, insurance, payroll, payroll tax (retailers are presently receiving temporary relief) electricity, land tax, and for most of us Corporation of Hamilton taxes since you might be burdened with the same in your business.
But while an increase in duty may seem unfair to you, I ask that you consider a few things. For the most part, goods brought in by you regardless of how you import them are discretionary purchases. This is what I call the need vs deserve factor. Your teenage daughter will probably need a new school uniform but might deserve the new dress she wants if she receives all As on her report card. Youll probably be buying her uniform in Bermuda and youll decide where youll buy her new dress on all sorts of factors. We, as retailers hope that you will make that discretionary purchase here.
Your ability to make a choice on where you make your discretionary purchases however will not change regardless of duty rate. Repeat, it will not change. The woman who is claiming to be having difficulty finding a size 2 can shop any where she likes but should she choose to shop abroad the result will be that her purchase will carry a premium or tax. It always has. Now you might say that this is unfair and its the greedy retailers and Government trying to get more money but this would be unfortunate. The truth is that our global and local recession necessitates the increase in this tax and frankly, it is time to protect the local bricks and mortar retailers from any more closures which will certainly translate to higher unemployment. This is not a mandatory tax. It is a tax on your discretionary spending overseas. It is fair and its your choice. Keeping Bermuda dollars in Bermuda will keep Bermudians working.
Now lets turn this subject back to you. What do you do for a living? Regardless of your profession, your industry is essentially a protected Bermuda business. Think about it. Need a lawyer, architect, interior designer, accountant, teacher, fireman, doctor, freight forwarder, courier (even Mailboxes Unlimited), plumber, painter, electrician, air conditioning technician, and any kind of repair person? They will be either Bermudian or employed by a Bermudian company. Its too bad retail didnt enjoy the same protection. Perhaps that Bermuda dollar wouldnt have slipped so quickly through your hands and into the hands of an overseas store if duty for personal importation had been regulated to support local retail businesses. Whats really ironic is that retailers use all of your services but the professional courtesy doesnt always extend to us.
Now think about the value of your home and how it will be diminished if quality of life factors are missing in your community. While you might take for granted the fine service you enjoy from many professionals, would you move to a community without retail? Would they? Do you think tourists want to visit an empty Hamilton? Witness everything that is going on in St Georges or, as the case may be, what isnt going on. Would you expect international business people to move in to a community without a retail presence? No you wouldnt.
Speaking of real estate, I am amazed that the real estate community isnt shouting from Bermudas roof tops in support of Bermuda retailers. The third tier of Bermudas economy is real estate, right after International Business and Tourism. Take a good hard look around Hamilton and St Georges at the number of empty retail shops and then think about how this impacts your home. Empty commercial real estate translates into an unhealthy real estate market for the residential market too. Of course there are many factors contributing to the sagging real estate market but empty stores dont exactly instil confidence.
A few weeks ago (The Royal Gazette, January 24, 2012) Mr Thomson made an argument that increasing duty for personal importations for windows and roof repair materials might be enough of a negative to persuade people not to build or repair their home and further stifle the economy. I guess he forgot to look in the phone book and see the number of retail stores offering windows, doors, building supplies, paint and you name it for home improvements. The real estate community probably forgot that they either sold or rented these retail spaces to these same retailers and probably told those folks what a great location this will be for your business; the location being Bermuda, their commission received in Bermuda dollars.
The hard truth is that any kind of tax/duty is tough to embrace and a potential increase will certainly pinch. But we all share in the responsibility of Bermudas success even when its uncomfortable. The retail community, which includes 4,000 employees, supports you and your professions and services. Its time to think about how you can be fully vested in Bermuda and not just once in a while and certainly not over whether your discretionary purchases from overseas carry a higher duty. Build Bermuda first.
ELAINE C MURRAY
The Irish Linen Shop
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