Richards: Work to begin on pensions, but any tax reforms must wait
Work on reforming Government pensions will begin this year, says Finance Minister Bob Richards.
But reforming the taxation system will take a bit longer if at all.
We are going to be looking at the structure of particularly Government pension plans. The world has moved from defined benefit pension plans to defined contribution pension plans, Mr Richards told The Royal Gazette.
If you have money in the bank and the amount of interest its yielding is so small it looks like a typo, its hard to make promises that you can pay somebody a pension based on their final salary.
If you have stock markets dropping by almost 50 percent in a year, it really puts any promises you have based on final salaries in serious jeopardy.
He added that while stock markets have been going up over the last four years markets and people have been traumatised by what happened in 2008/09 and its caused people to re-evaluate investment risk.
So we have got to figure out a way to make the Government pension plan more sustainable.
He said Government could access private sector support in reforming pensions.
We need to marshall those resources, because there are a lot of people who want to give their time and expertise to change the trajectory of this Government and want to do it for free. So we are going to avail ourselves of these peoples talents to bring those sorts of things to the table.
Mr Richards said he had not yet received the report from an actuarial review of Governments Public Service Superannuation Fund which was started last year by the former administration.
There has long been concern about the sustainability of the PSSF, which had an unfunded liability of $778 million as of a year ago.
Asked about tax reform, he said the time was not right to make any changes.
We have a tax system that is somewhat progressive. For people whose entire income is their salary, for them payroll tax is income tax.
He said: The area where we have a lot of trouble in terms of Government revenue has been the consumption-based taxes and also the tax concessions we have given to the weak parts of our economy.
Weak performance of the construction, tourism and retail sectors have led to weak Customs duty receipts.
If youre going to change a tax system you need to change it during times of plenty, not when youve got your back up against the wall.
Our problems here are because of competitiveness. And theres always a risk involved with changing a tax system. Youre going from something that you know to something that you dont know.
In its Budget Reply this year, the Opposition called on the Government to examine reform of the tax system.
We must examine whether it is necessary to modernise our system of revenue collection and consider the reform of our tax structure, said Shadow Finance Minister David Burt.
Mr Burt stressed that his party was not calling for an income tax — whether personal or corporate.
The Chamber of Commerce has asked Government to consider introducing a value added tax system.
One of the main benefits of a VAT style system is that it broadens the tax base beyond Customs duties.
Certainly the retailers would benefit as the tax would be paid when goods are sold as opposed to the current Customs duty system where the tax is paid up front, said Chamber president Ronnie Viera.
But he agreed that such changes should wait until economic conditions improve.
Where is missing $807,000 from Sandys 360?
Island link to wildfire ‘zombie apocalypse’
Simons and Richards tipped for Cabinet roles
‘Amazing’ evening of family fun
Amaral to lead combined KeyTech and CellOne
Parfitt-Williams helps West Ham to cup glory
Final overseas camp for Regiment veteran
Island’s big bang query
Crockwell has ‘no intention’ of joining PLP
Blacksmith Ryan is a cut above
‘Emotional’ opposition to airport plans
UN: more profit booked in Bermuda than China
Request for DPP application details rejected
Harbour Nights returns
Bermuda Institute teams top KPMG Challenge
Take Our Poll