Feel-good Budget presentation belies reality
The Budget presented on Friday was a display of political spin. The feel-good presentations and the facts tell two completely different stories.
The facts are that gross domestic product estimates for growth have been revised down by half, revenue for the present fiscal year was lower than budgeted whilst expenses were higher than budgeted.
Despite this damning missing of targets, Government felt it appropriate to forgo the rainy day fund contribution of $65 million to the sinking fund in order to project false strength and present a “balanced”Budget.
The reality is that last year the Government missed its Budget projections by $15 million, so what faith should Bermuda have that it can hit such a narrow target set for next fiscal year of a mere $7 million surplus?
There is no track record to support the confidence they have showed in simply skipping the sinking-fund contribution of $65 million. It’s like not paying your bills and telling everyone you’re rich.
Despite attempts to distance themselves from the “tax and spend” label, the actions show that to be the case:
• The Budget boasted no new taxes of $50 million, yet raised existing ones by $39 million.
• The Budget celebrated backtracking on the residential rental tax, but then went and raised land tax. A land tax increase that actually raises the burden on the lowest bands of annual rental value. The rental tax at least exempted people who live in their own homes. The land tax, as presented, provides no such relief.
• Payroll tax exemptions were provided to international business and only the largest retailers. Where is the relief for small businesses struggling to survive?
• Foreign exchange tax was raised, which unfairly targets Bermudians who primarily earn their salaries in Bermuda dollars and does not affect primarily guest workers earning US dollars in international business.
• Foreign exchange tax also drives up the cost of living as it has made everything imported to Bermuda more expensive.
• Charge backs on card payments of government fees make it more expensive for everything from TCD licensing to customs duty. Unfortunately, credit card agreements do not allow businesses to charge back those same fees to their customers.
And yet, despite the increases to the tax burden for Bermudians, the Government has taken no steps to decrease its own spending.
People are having to deal with once-a-week trash collections, but are not seeing the benefits of such austerity.
A lot of talk about “efficiency” and “reform”, but no results. Speaking of no results, even fintech was barely a passing comment in the Budget.
Despite having no money, apparently Government is proposing to use the taxes paid by all Bermudians to subsidise mortgages exclusively for civil servants.
There is no mention where this money will come from though, or any idea of the cost.
The Budget all but dismisses the one economic truth that matters: Bermuda needs more people on island working and spending money.
What the retail sector really needs is more consumers and more revenue, not tax breaks for the select few.
This Budget seemed to be a holding-pattern budget. The status quo was maintained and in many cases worsened, while this government holds its breath in the hope that something other than their lack of results will change our fates.
Quo fata ferunt.
Nick Kempe is the shadow finance minister