New tax for financial services wins support

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A Bill to introduce a new tax for financial services won narrow support in a House of Assembly vote after Opposition MPs argued it would result in higher fees for “Mr and Mrs Bermuda”.

Finance minister Bob Richards admitted that there was no initial consultation with any of the affected parties with regards to the Financial Services Tax Act 2017.

The Bill came to a vote, with Government Whip Susan Jackson counting 15 votes against, and 15 votes in favour, herself casting the deciding vote in favour making 16 in favour.

The Bill was branded “The Airport and America’s Cup Tax Bill” by Progressive Labour Party MPs Diallo Rabain and Kim Wilson.

However, Mr Richards countered that the Bill “is the PLP deficit tax increase” rather than an “airport or America’s Cup tax”.

The Act will see money service businesses hit with a 1 per cent tax on their aggregated incoming and outgoing transmission volume.

That figure was reduced from the 5 per cent announced in the Budget Statement, after consultation with the business services industry, according to Mr Richards.

Banks will pay 0.005 per cent of their consolidated gross assets, while local insurance companies will have a 2.5 per cent tax on gross premiums earned, excluding premiums from health insurance.

Mr Rabain and Ms Wilson claimed that the new tax on banks, insurance companies and money service businesses, expected to generate more than $11 million per year, would eventually impact “Mr and Mrs Bermuda”.

Ms Wilson, shadow health minister, said: “If I am an insurance company, I will not eat that — I’ll pass it on to the consumer.”

Speaking on “astronomical” bank fees, she described the Bill as “reverse Robin Hood, that takes money from the poor, or in this case the middle class, and gives it to the rich”.

Shadow Attorney-General Michael Scott echoed concerns about the equity of the Bill and PLP backbencher Wayne Furbert asked: “Is this the best they can do?”, while deputy Opposition leader Walter Roban said the move could bring concern to the business community.

Opposition leader David Burt, who pointed out that Bermuda is “the most expensive place in the world to live”, also insisted this “Act here will make it more expensive to fill the revenue hole to pay for the Minister’s projects”.

He also noted that the tax on money services businesses had been dropped, “just like the mysterious customs duty hikes, which have magically disappeared”.

Mr Richards stressed that the “overriding objective and the overriding risk to the Bermuda economy, to Bermuda as a country and to the Bermudian people is the excessive debt that this Government has”.

Noting that “nobody likes to pay more taxes”, he added “we made a decision because nobody was going to agree to it”.

Mr Richards said the Government had made a decision to reduce the deficit “that we inherited from the other side”.

Responding to questions from the Opposition about why the tax on money service businesses had been reduced to 1 per cent, Mr Richards said 5 per cent was deemed “way too high” after consulting with stakeholders of the business service industry.

But he added that it is “really not that big a deal in so far as the dollar amount of the taxes raised” because money service businesses “are very small compared to the business operations of the banks and insurance companies”.

But, pressed by Mr Burt about what consultation was made with the money service business before the 5 per cent was set, Mr Richards admitted that there was none.

And when Mr Burt questioned what consultation was done with the banks and insurance companies, Mr Richards conceded that “this tax was not arrived at with prior consultation with the members involved”.

He added: “We used comparative numbers with some other similar jurisdictions to Bermuda.”

And when pressed what these were, he said: “Mainly the Bahamas — these rates are very similar to what they use.”

MPs voted along party lines, with Independent MP Shawn Crockwell voting in favour.

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Published Mar 17, 2017 at 8:00 am (Updated Mar 17, 2017 at 7:30 am)

New tax for financial services wins support

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