State of Bermudas finances: Time to get tough on tax arrears, unpaid fines?
The State of our Economy: Anyone with business sense or intelligent intuition suspected, conjectured, and estimated that government coffers were routinely running negative by 250-300 BMD million a year.
And now, what an daunting task we have ahead of us to clean up our financial books, contracts, budgets, grants, and related expenditures in order to be fiscally solvent with unqualified (clean) audited report.
I dont envy the current Minister of Finance.
The urgency of the situation appears overwhelming.
The mandate to thoroughly understand the countrys true financial position is immediate.
The first action for any organisation in a deteriorating financial situation is to raise cash — by any legitimate means possible: borrow, initiate fire sales of available assets, remove impediments to increasing revenues, and motivate business partners to participate in the exercise.
The proviso is, some money is better than none. The question is — where is that cash coming from?
A Bermuda bond offering
We learn this week that another large bond offering is necessary, just to keep government basic services afloat.
This time, Minister, will you please consider granting the Bermuda population the right to participate in this offering.
Lets assume that 300 BMD million is the initial offering, an amount that possibly matches the current cash shortfall.
If every resident with a savings account was allowed to purchase just one $5,000 Bermuda bond paying a decent interest rate, the bond offering would be more than 50% fulfilled.
There would be little persuasion needed to have more affluent investors here picking up the remaining tranches. No need to obtain valuable foreign currency for repayment of the interest and principal.
No need to worry about early repayment with us; we want to participate, to be part of the solution.
We residents here have the time and patience to wait. We want our country to return to financial success.
Payroll taxes in arrears
It is estimated that the amount of uncollected late or non-payment of payroll taxes, old age contributory fees, health insurance premiums, and Bermuda National Pension Scheme employer and employee contributions are in the millions of arrears, possibly as much as nine figures (100 million+).
We hope these numbers are lower, but never-the-less, every employer that has not met its employee trust contribution responsibilities places an additional strain on the government social services divisions.
Employees impacted by loss of health benefits and lower pension distributions have no recourse except to seek financial assistance.
Enforce legal actions against these late payer owners (and responsible persons) and recoup the taxes due. Forget about prosecution, it is too slow, and too lenient.
Who remembers a recent case where an owner was fined a mere $250 for years of lost payroll tax, pension contributions and related benefits.
Instead, garnish company owner wages, investment accounts, pensions, and bank accounts. Attach liens to their physical properties, and liquidate if necessary.
Confiscate passports until balances are cleared. And by the way, change the laws permitting those owners who bankrupt one company, then incorporate a new one, thereby permanently avoiding those employee liabilities.
Think this is harsh. You have no idea.
United States Internal Revenue Service waits three months! No payment — bank accounts and other assets are frozen until that debt responsibility is paid. Plus payroll liabilities are never forgiven in bankruptcy.
We all tend to forget one very important thing: when the recalcitrant employer does not pay, he or she is stealing from us, as well as from the employee.
Every other civilised government enforces payroll employer obligations. We should too.
Traffic and parking violations
Apply the same tools and treatments as for those who wilfully avoid payroll taxes.
Again, it is rumoured (unsubstantiated at this time) that old tickets and violation unpaid balances are in the millions. Impound the vehicles.
Revoke licenses. Make the offence financially serious, and very, very difficult to avoid.
Government non-producing assets. Liquidate white elephants and other excess government assets.
The Bermuda People are watching every penny trying to get through this difficult time. They have had it with excess. Get rid of those fancy cars. Sell those condominium units.
The longer they sit the less value they retain.
Drastic times call for drastic measures. Raising cash is the name of the game.
Cleaning up our fiscal house is the first step in renewed investor confidence for moving forward to the second most important part of the equation. Raising revenue.
Martha Harris Myron CPA PFS CFP (USA) TEP is a cross border financial planning specialist at Patterson Partners Ltd, an international investment and strategic planning services firm in Hamilton, Bermuda. Council Member of the American Citizens Abroad Professional Tax Advisory Council. www.americansabroad.org
The opinions expressed in this article are those of the author alone, and not The Royal Gazette.
The author has no affiliation with any individual or business mentioned above. This article is intended for general educational purposes only and cannot be used for specific individual tax, investment, or retirement advice, nor can this article be relied upon for any personal financial planning purposes.
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